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Interest in NRO deposit is taxable in India

Such an amount would be subject to tax deduction at source in India

Q. What are the tax implications of opening and maintaining a non-resident ordinary (NRO) account?

Expert Comment: Interest earned from deposits in NRO account is taxable in India. Further, such an amount would be subject to tax deduction at source in India.

However, you may be eligible to claim any benefits that may be available under the Double Taxation Avoidance Agreement (DTAA) which India might have entered into with the country of which you are a tax resident.

Further to this, you may consult your tax adviser for further guidance.

Q. What are the consequences of a non-resident Indian (NRI) not filing return of income?

Expert Comment: Any person who is required to file return of income but has not done so would be subject to the following consequences:

-Pay interest at the rate of 1% for every month or part of a month starting from the date immediately following the due date and ending on the date of filing the return of income or where the return is not furnished, ending on the date of completion of assessment. Interest would be payable on the amount of tax on the total income that is due after giving credit to advance tax, tax deducted at source, relief (if any) under the applicable DTAA and so on;

-Losses (if any) will cease and the NRI will not be able to carry forward and set-off such losses;

-Penalty for concealment of particulars of one’s income which may extend up to three times the tax sought to be evaded;

-Penalty of Rs.5,000 for not filing the return of income by end of the relevant assessment year; and

-If the failure to file the return of income is wilful, then the assessee could be punished in the following ways:

a) In case the tax sought to be evaded exceeds Rs.25,000, with rigorous imprisonment for a term not less than six months but which may extend to seven years and with fine;

b) In any other case, with imprisonment for a term which shall not be less than three months but which may extend to two years and with fine.

However, if the return is furnished before the expiry of the assessment year or the tax payable does not exceed Rs.3,000, then the person will not be subject to the prosecution provisions.

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