Friday, May 22, 2015

Can I withdraw money from PPF account before maturity?

Can we withdraw money from PPF account before maturity?
One of the most common question people ask before opening a PPF account is "can we withdraw money from PPF account before maturity?". One reason of this question is long tenure of PPF account (15 years). Short answer of this question is Yes, you can withdraw money from PPF before 15 years but you can only withdraw a maximum of 50% of the balance at the end of the fourth year and that too only after completing 5 years. Which means for first 5 years you cannot withdraw any amount from PPF. Liquidity is always an issue with long term investment option and you should not be putting any money you need in immediate future on long term investment like PPF. They are for big ticket items like marriage, higher education of your children etc. You must manager your other expenses and emergency expenses via liquid fixed deposits, cash in saving account and fixed maturity mutual fund which allows you to break them any time.

Thursday, May 21, 2015

Is it Mandatory for NRI to File Income Tax Return in India?

Does it necessary for NRI to File Income Tax Return in India?
One of the most common doubt every NRI has is whether its mandatory for them to file incomes tax return in India or not? Short answer is, it depends. If you are a Non Resident India for a financial year let's say 2015-16 i.e. you stayed outside India for more than 180 days then your status becomes NRI, but you are also eligible for basic exemption limit which is currently 2.5 lakh in India. If you have income in Indian rupees and your income from various sources e.g. rental from flat, interest earned from fixed deposit, dividends earned from stock exceeds basic exemption limit then its mandatory for an NRI to file income tax return also known as ITR forms. BTW, its better to file income tax return every year because sometime bank deduct TDS on interest earned by Fixed deposit, especially if you have opened fixed deposit in resident saving account or NRO saving account then TDS will be deducted at rate of 20% and 30%, if you file income tax return then you can get that money back by claiming tax refund, but if you don't file income tax return then that money is gone.

Saturday, December 13, 2014

Does Interest on NRE Fixed Deposit is Taxable?

In short, No, interest earned on NRE fixed depsosit is tax free in India. If you are an India working abroad and earning in foreign currency, you have couple of more investment options available than to a resident customer. If you keep your money or some part of your money in India, NRE fixed deposit is the best option for you. Fixed deposits are most popular saving and investment method for millions of Indians from long long time. One reason of this is because it provides safety of principle amount and interest rates were very high compared to developed economy. You can easily gain 9% of quarterly compounded interest rate on a FD in India, but most of the Indian makes a mistake while thinking that FD provides high interest rate. What they don't consider is taxation. Whatever interest you earn on fixed deposit is taxable in India, and that too with 20% if you don't submit your PAN card, otherwise FD interest will become part of your taxable income and clubbed together while deciding which income tax slab you are on. NRE fixed deposit excel here because you don't need to pay any tax on interest earned. This is the single most reason I recommend NRI to put their money on NRE fixed deposit. If you add taxation 9% interest rate easily reduced to 6 to 7% depending upon your income tax slab, but if you don't have to pay any tax then what you see is what you get.  So to answer the question, Interest rates on NRE fixed deposit is not taxable. For those who are new to NRE deposit, let's learn more. 

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