| Question And Answer | |
|---|---|
| Subject: | Holding of NRE account by a foreign citizen , whether interest income is exempt ? |
| Category: | Income-Tax |
| Querist: | Martin Joseph Selvaraj |
| Answered by: | Advocate Shashi Ashok Bekal |
| Tags: | Foreign citizen, interest exemption, non-resident taxation, NRE Account |
| Date: | June 28, 2021 |
A person who is an Indian but holds a Singapore citizenship. He has been living in India, for more than 2 years. He still holds NRE account and claims that the interest is exempt from tax. Bank is allowing him to continue to hold the NRE account and is not deducting TDS because he is a foreign citizen. Is the legal position correct?
Firstly, Citizenship is not a test of residency. The NRE account will be exempt from tax. However, the tax payer while filing the return of income will have to compute its tax liability as per its residential status.
If the Assessee is a Non-resident, the income earned from the NRE is exempt under section 10(4)(ii) of the Income-tax Act, 1961 (Act).
The Hon’ble Income-tax Appellate Tribunal – Mumbai Bench in the case of Venkatesh Satyaraj v. DCIT [2017] 53 ITR(T) 406 (Mumbai) held that interest earned in non-resident external account by assessee who was a person not resident in India as per provisions of FEMA and an employee of a USA corporation and on deputation to India, was exempt under section 10(4) of the Act.
Further, the Banks deduction or non-deduction of TDS is not conclusive as to the assessee’s tax liability.