Friday, March 31, 2017

Can you send money from abroad to a normal Indian savings account, will it be taxable?

One of the frequently asked questions by people going abroad is that, whether they can send money to a resident saving account in India or not? Will that be taxable? The answer to this question depends upon whose resident saving account? For example, if you send money from abroad to a normal saving account of your parent, spouse, or children then it will be considered as a gift from Income tax perspective and gift to parent, spouse, and children are not considered as income in India, hence they will not be taxable.   But, if you send them to somebody else’s normal saving account then it will be considered as their income and they are liable to pay income tax on that.


Remember, as an NRI you cannot have a normal saving account but you need to convert it to NRO account.   So there is no question of sending money from abroad to your own normal Indian saving account.


Sending money from Abroad to NRO account

You can send money to your NRO account from abroad using online money transfer, wire transfer or any other banking channel. You can even deposit foreign currency cheques into your NRO account. The amount you transfer is not taxable, neither in abroad nor in India, providing you already paid tax on that income in Abroad.

But, the interest earned on NRO saving Account will be taxable (see here) and that will be considered as your income in India. If that interest is more than 2.3 lakh INR, more than the basic exemption limit of income tax for Indian citizens then you need to file income tax return and pay tax.


Though it's not mandatory to file income tax return for NRIs (see), especially if income is only generated from bank saving account or fixed deposit and TDS is already deducted on that, it's better you do to reclaim the money deducted as part of TDS.

Remember, the TDS rate on NRO account is on the higher side and can go more than 30% in certain cases. You should also make sure you have updated the PAN and submitted the DTAA application to reduce the tax on interest earned on NRO saving account or fix deposit as suggested here.


Sending money from Abroad to NRE account

If you transfer money to your NRE account then it’s not taxable at all because you have already paid the tax in the country you earned the money and interest earned on NRE account are not taxable in India (see here).


But, if you are a US citizen then your global income is taxed and that will include this interest portion of NRE account as well.   On the other hand, if you transfer money to someone else’s NRE account e.g. your wife’s then she might not need to pay tax because of lower income in the states.


Similarly, if you have an NRE account for your children you can transfer money to them for their expenses, that will also be considered as a gift to them and they don't have to pay income tax in India.

Can you send money from abroad to a normal Indian savings account, will it be taxable?


In short, even though you can send money from abroad to a normal resident Indian saving account with any private or public banks e.g. ICICI, HDFC, SBI, Axis bank or Bank of Baroda, when it comes to tax it totally depends upon whom you are transferring money to.

If you send money to your parents normal saving account in India from overseas then they don't have to pay income tax on them because that will be considered as a gift to them. Same is the case with sending money to a resident saving account of wife or children from abroad.

Though, if your parent or wife invest that money into a Fixed deposit and they earned some interest then that will be considered as their income and they have to pay tax on them. For example, if you send 40 lakh to your wife's normal saving account, which she puts on a bank fixed deposit for 1 year earning 10% interest then she will earn 4 lakh in one year which is more than 2.5 lakh, hence she will have to pay tax on that interest income.

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