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by
Rejimon K
, Muscat:
Non-resident Indians (NRIs) who hold Non-Resident Ordinary (NRO) accounts in
Indian banks will have to pay 30.9 per cent tax plus service charges of
around 2 per cent for the interests earned by their deposits, if they fail
to produce Tax Residency Certificate (TRC) from Oman government to avail the
benefit of reduced tax under Double Taxation Avoidance Agreement (DTAA).
The Reserve Bank of India (RBI), the central bank of India, has made the TRC
mandatory from April 1, 2013.
Since the governments of India and Oman have a Double Taxation Avoidance
Agreement, signed in 1997, until now, an NRO account holder had to pay only
10 per cent of tax for the interests earned by their deposits.
To avail this facility, an NRO account holder had to produce a self-attested
residency certificate and a copy of the pan card. Now, however, the RBI
insists on the TRC issued by the government of the country in which the NRI
resides.
Meanwhile, even though Indian account holders in Oman have the necessary TRC
documents, they do not know where they can get the documents authorised in
Oman.
"So far, we haven't received any enquiries from our clients about the TRC.
Moreover, we do not know where we can get the TRC documents authorised in
Oman," said an account holder in Oman.
In the UAE, if an Indian pays 1,000 dirhams, he can get a TRC from the
ministry.
Types of accounts
The Government of India has permitted NRIs to open rupee accounts in India
in order to repatriate funds from their home countries. The two most common
accounts are the Non-Resident External (NRE) and Non-Resident Ordinary (NRO)
accounts.
An NRE account is a bank account that is opened by depositing foreign
currency at the time it is opened. This currency can be tendered in the form
of traveller's checks or notes.
An NRO account is the normal bank account opened by an Indian who goes
abroad with the intention of becoming an NRI. An NRI can also open this
account by sending remittances from his home country or by transferring
funds from his other NRO account. It offers the same facilities as an NRE
account, except that any repatriation done through this account should be
reported to RBI by filling up prescribed forms.
The difference in the tax treatment for interest earned on an NRE and an NRO
account is that the interest earned on any type of NRO account as well as
the credit balances in this kind of account are taxed under the account
holder's tax bracket. On the other hand, interest earned on the NRE account
is totally exempted from income tax, and the credit balances in the account
don't attract any wealth tax. Any gift given to a close relative doesn't
attract gift tax.
Courtesy:
Times of Oman
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