MUSCAT, Aug 23, 2004
Times of Oman
NRIs in Oman are pulling their bank deposits from banks back home by
the millions, according to NRI sources.
Ever since the Indian government presented the finance bill (now before
the parliament), which includes taxation on NRI deposits, NRIs here
are pulling away their deposits and re-depositing them in local banks
here, the chairman and the financial adviser of the NRI Federation here
told the Times Business yesterday.
V. T. Saileswaran, chairman, and Jose Chacko (*), honorary financial
adviser, of the NRI Federation also noted that this ruling will greatly
affect Kerala. Kerala will suffer the most because NRKs (non-resident
Keralites), one of the biggest remitters in India, will now look for
other means. We should understand that Kerala is greatly dependent on
NRK deposits, they said.
However, this means that they will turn their attention to other areas,
and perhaps invest in land and property. This will in turn boost land
and property values, they noted.
The finance bill has done away with the exemption available to NRIs
in respect of interest on NRE deposits and FCNR deposits with banks
with effect from September 1, 2004. This means that the interest
accrued after September 1, 2004, will be included in the taxable income.
Banks are required to deduct income tax on NRE and FCNR deposits of
NRIs at the rate of 20 per cent. An education cess of 2 per cent is
applicable on the tax and surcharge. If it is a foreign bank the rate
will be 30 per cent plus, Jose Chacko, who has done an in-depth
study on the same, explained.
An NRI is not required to pay any income tax if his taxable income
is not more than Rs50,000. In this case an NRI has to file his
return of tax for getting the refund of tax deducted by banks.
Since the requirement of issuing the TDS (tax deducted at source)
certificates by the deductor is abolished (with effect from April 1,
2005), the deductee will get the credit on the basis of the annual statement
issued by the prescribed income tax authority or the agencies authorised
by that authority.
This annual statement will be prepared on the basis of quarterly
statements sent by the tax deductors. It is obvious that such consolidation
will be done on the basis of PAN (Permanent Account Number).
Even though NRIs are exempt from obtaining the PAN under section 139A(8)(d)
of the Income Tax (IT) Act, procedurally the IT department will not
accept the returns of income from any person who has not obtained or
applied for PAN. All these make it compulsory to get a PAN by every
person who want to claim refund. In effect if any person wants a refund
of tax deducted by banks, where the tax deducted at source is more than
the tax payable, he has to:
Compulsorily get a PAN number
Get the annual statement of tax deducted and paid
File the return of income every year.
Appear before tax authorities in India, if summoned.
For those NRIs who are residing far away and visiting India not very
often, compliance of all these requirements will create unwarranted
In our view, NRIs may not have any objection to paying marginal
tax and thereby contribute to the economic development of the nation,
but the hardship of preparing accounts, appointing consultants, filing
tax return, awaiting assessment, getting the refund etc are going to
be unpleasant experiences for NRIs, Saileswaran and Jose said.
The NRIs can ask for a lower percentage of tax deduction or complete
exemption of tax, if he is able to get a certificate from the assessing
officer of his area of residence in India, by satisfying him about source
of income and the need to deduct tax at a lower rate or exempt the same
Banks are required to deduct income tax if the interest credited
or paid in excess of Rs5,000. This makes it compulsory for an NRI to
file the Return of Income even though he has no taxable income,
The TDS collection by banks will be shown in Table A and the tax implications
of various levels of income will be illustrated in Table B, assuming
that the only source of income is the bank interest.
Tax details at a glance
Interest income will attract tax after September 1, 2004 on the existing
deposits and fresh deposits.
Due to the basic exemption limit, there is no tax up to Rs50,000 taxable
A deduction up to Rs12,000 under section 80L is available on the taxable
Banks are required to deduct TDS, if interest payable exceeds Rs5,000
For lower rate of deduction or no deduction, Form 15H to be filed with
Surcharge on Income Tax is applicable only if taxable income exceeds
Education cess of 2 per cent is applicable on tax and surcharge payable.
Rebate on income up to Rs100,000 under section 88D will not be available