Saturday, August 1, 2015

Do You Need to Pay Tax When You Transfer Money to India from Overseas bank?

Do I need to Pay Taxes in India When I transfer money from Overseas bank to India?
Many of my IT friends are working abroad and when you go abroad the first time, you have a lot of queries in your mind, related to NRI status, Taxation in the foreign country, remittance and Taxation in India. One of the most common questions I see is "Do you need to pay taxes in India when you transfer funds from and Overseas bank to Indian Saving account?", the short answer is No, provided you are an NRI i.e. you have stayed more than 182 days abroad in that financial year (31st March to 1st April).


Since you have already paid tax on that amount in the country you are earning and currently staying e.g. US or UK, you are not required to pay further tax on same money, whether you keep them in US Dollars or Indian Rupees; but there are other things to consider. For example, why you want to transfer your foreign currency in India? Who holds that saving account etc? Motive is important because it will open more options and I would say better options.




Transferring Money for Investment

when you are simply remitting money using Xoom or Transfast for investment e.g. for opening a fixed deposit, its better to open an NRE saving account and then transfer funds there, Why? because interest earned on NRE fixed deposits are tax free in India. Suppose you want to open a fixed deposit of 10 lacs in India and you transferred that money on your mother's resident saving account ( if you are an NRI you cannot hold resident saving account in India, you can only hold NRE, NRO and FCNR accounts) then interest earned on that deposit will be eligible for taxes and bank will deduct TDS at the rate of 20% if PAN number is not available. If you open fixed deposit from funds available in your NRE saving account, all those interest earned will be your gain because no tax will be levied on interested earned in NRE fixed deposit.



Also don't transfer funds to NRO account for investment purpose because interest earned on NRO account is also taxable. NRO account is only to hold your income in Indian rupees, you should only transfer foreign currency converted amount to NRO if you absolutely need it for some expenditure.


Tax on money transferring to India from overseas bank

















If you are transferring fund from overseas to your parents for their personal expenses, it make sense to transfer directly to their resident saving account, there won't be any further tax on that amount.



In short, when you transfer foreign currency from abroad to India using remittance services like Xoom, Transfast, Remit2India or MoneyToIndia no taxes are required to pay on that amount if you are NRI, if you are not NRI then yes you have to pay tax on your global income but you can always ask for a claim against the tax you paid overseas.


If you are interested to learn more about NRI investments and NRE and NRO accounts e.g. features, benefits and limitations, you can also check following article :
  • Can NRI invest in Public Provident Fund In India? [answer]
  • Can an NRI open more than one NRE accounts in India? [answer]
  • What happens to NRE accounts when NRI returns back to India? [answer]
  • Is it mandatory for NRI to file income tax return in India? [answer]
  • Can you transfer money from NRE account to NRO in India? [answer]
  • Can you break FCNR fixed deposit before maturity? [answer]
  • What is difference between NRI, NRO and FCNR account? [answer]
  • How to deposit money on NRE and NRO account in India? [answer]

4 comments:

  1. Hi , My friend worked in abroad and come back to 2014 but he kept his savings money in his overseas bank. He want to take that money back to India now. Is this amount is taxable and the new law impact his money?

    ReplyDelete
    Replies
    1. Hi, the earnings your friend has in his overseas account was already taxed in that country. So, for bringing the money to India now, he will not have to pay additional tax. Which country is he bringing the money from?

      Delete
  2. My mother's income is less than 2.5 lakhs/year. So can I send her some money to deposit as FD? Will that attract any taxes?

    ReplyDelete
  3. No, i guess you don't have to pay tax on you money transfer to India. You have already paid tax on you earnings. Many online remittance services offers free remittance to India.

    ReplyDelete

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