Q1154. Who pays tax on the interest received in a joint bank account in India

Question: Dear FAQNRI Information, I currently have an NRE Bank Account with my wife and we are both signatories to the account. Is it correct to assume that this is deemed to be owned 50% each? So for example, if it was say an NRO account instead, we would both pay tax on each 50% share of interest earned from the account? Is there a way or is it permissible, for us to deem, through mutual agreement between us, that say my wife "owns " 99% and I own 1% or vice versa? Thanks,

Answer: Generally people open joint bank accounts for the sake of convenience. While basically both joint holders have equal access to the account, they are classified as either the primary account holder or the secondary account holder. When joint bank accounts are opened the application form would have a place to identify the primary account holder. My understanding is that where no primary account holder is identified, the first name in the account record may be treated as the primary account holder by financial institutions. Banks would deduct taxes due on the interest income in the name of the primary account holder and issue the TDS deducted document in the name of the primary account holder. You cannot have a mutual agreement with your wife to pay tax on 99% of the account balance and for you to pay tax on the remaining 1% of the account balance. You options in my opinion are to either: • Designate your wife as the primary account holder of your joint account. • Or open two separate accounts.