Tuesday, April 15, 2008

NRO DEPOSITS TO BE TREATED AS INVESTMENT INCOME: AAR

Giving a boast to investment by Non-resident Indians, the Authority for Advance Rulings has said the non-resident ordinary (NRO) deposits should be treated as investment income and taxed at 20%. At
present, banks consider such deposit as interest income or income from other sources and deduct tax at source at the rate of 30%. NRO account are the same as saving account for resident Indians but are so designated on change of residence . The interest rate for such deposit is at about 9% per annum. The AAR held that since the applicant would make the NRO deposit with convertible foreign
exchange in banking company, which was not a private company, it would be treated as ‘foreign exchange asset’. The income through interest earned from the deposit would-be treated as investment income under section 115C of the I-Tax Act and would taxed at 20%

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