390. Avoiding deduction of TDS

from NRO bank account | Form

15H

Question: Sirs Greetings. My wife and I are aged 68 and 74 respectively. Our children (one son and one daughter) are married and are working in U.S. We have become Green Card Holders very recently. We have no major interest in India. We have some Savings and Fixed Deposits accounts with nationalised banks. These deposits have been opened prior to our becoming green card holders. Our interest income do not attract levy of incometax. Is it mandatory for us to declare an NRIs and change our accounts as NRI accounts or continue the accounts as non- NRI accounts and file income tax returns in India as and when necessary? (i.e. when the net income after deductions is taxable). When once we declare as NRI, I assume that our interest income is exempt from TDS. If our account is treated as NRO, then we will get interest deducted at source at 30%. If we do not declare as NRIs, are we supposed to continue to file Form 15H in order to get tax exemption?. Anyway, your advice on this matter will help us to tie the loose ends when we are in India in May 2012 for a short trip. Kindest regards (Name Withheld) Answer: Keeping resident bank accounts in India when you are a NRI, is not legal. You should inform your bank about your NRI status and they should re-designate your accounts as non-resident accounts, such as NRO Account. You are correct in saying that if account is treated as NRO then TDS of 30% will be deducted. However this is the law and there is no way around this. By not re-designating your bank accounts to non resident accounts earlier, you may have gained an illegal advantage. This is because Indian residents who earn interest on their resident bank accounts are liable to pay TDS on amounts over and above Rupees 10,000. This exemption is not available to NRIs. (http://nriinformation.com/articles4/tds.htm) By keeping resident accounts you may have benefited from this exemption. Regarding Form 15H, used to avoid the deduction of TDS by senior citizens, kindly be aware that Form 15H is not applicable for NRI’s. Good luck with your visit to India.