Interest from bank deposit abroad is not taxed in India
Non-residents are subject to pay tax only on the income received or deemed to be received in India
Q. I am a non-resident Indian (NRI) staying abroad, while my sister is an Indian resident. Both of us jointly hold some physical shares that were bought 10 years ago. We want to first get them converted to demat form, and then sell them. Is my Permanent Account Number (PAN) card required, or can my sister do this herself? How will the gain or loss from the sale of shares be taxed?
Expert Comment: Assuming that the shares held by you are admissible for dematerialization, you and your sister could approach a depository participant (DP) to have an account opened by complying with the know-your-customer norms and submit a dematerialization request form (DRF) and the physical share certificate to the DP. The DP would take necessary steps to convert the physical shares into demat format.
The gain or loss on the sale of shares would depend upon various factors such as nature of capital gains, your residential status and the country in which you are considered to be a tax resident. In case the shares held by you are listed equity shares, long-term capital gains (LTCG) arising from sale of such shares which are subject to securities transaction tax (STT) will be exempt from tax. In case of unlisted shares, LTCG will be taxable at the rate of 10% in the hands of an NRI. However, the gains will be subject to any beneficial treatment under the Double Taxation Avoidance Agreement that India might have entered into with the country in which you are a resident.
Q. I was recently granted NRI status. Is the interest earned by the deposits in my accounts abroad taxable in India? I send part of my income to my family and have investments in India.
Expert Comment: I am assuming that you are an NRI for tax purposes. Interest earned by NRIs from deposits in bank accounts abroad will not be taxable in India. Non-residents are subject to pay tax only on the income received or deemed to be received in India or income accruing or arising or deemed to be accruing or arising in India. Therefore, the interest on deposits held in your accounts abroad would not be taxable in India.
The funds sent by you to your family and investments made in India would take the character of appropriation of your income, which as such should not be taxed in India. However, income arising from the investments in India may become taxable depending on the nature of investments made.