Non Resident Indians (NRIs) were being treated unfairly, when it came to tax deducted at source on many instruments, particularly fixed deposits.
An NRO has to pay in excess of 30 per cent as TDS on NRO deposits, unless of course the relevant DTAA documents are submitted.
This is a welcome move, as Tax deducted at Source is severe for Non Resident Indians (NRIs).
So, one can gain on NRO Deposits, though NRE Deposits do not attract any tax, so there is not question of TDS at all.
An NRI is defined as one who stays in the country for a continuous period of more than 182 days.
These Non Resident Indians, tend to open either NRE Accounts and later open NRE Fixed Deposits Or NRO Accounts and later NRO Fixed deposits.
For receiving domestic payments, the latter is a must. For example, if the NRI has rental income, than he has to open a NRO account. Now, even if this NRO savings accounts has some balances, he will attract an interest, which is subject to TDS of over 30 per cent.
In the case of a domestic resident savings account, there is no TDS cut, if the interest income is below Rs 10,000 in a savings banks account. This is not applicable for NRO accounts and hence there are some disparities.
The Union Budget 2016-17, has taken the first step to make it fair, by ensuring that if a certain conditions was prescribed, they would not be subject to a harsher TDS.