NRIs and DTAA: All you need to know

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NRIs and DTAA: All you need to know
If you are a Non Resident Indian (NRI), you would have observed that a 30.9 per cent tax has been deducted from your NRO Savings Account on interest the bank has paid.

Now, to get this money back, if you are not in the highest tax bracket, you need to file your tax returns in India. This is not only the case with NRO Savings Account, but also the case with NRO Fixed Deposit account.

How to reduce this tax deducted at source liability?

India has signed an agreement with several countries called the Double Taxation Avoidance Agreement (DTAA). Under this agreement, if you are a residing in a select set of countries, your TDS would be cut only at 10 per cent and not at 30.9 per cent, subject to you providing certain details.

Read on the list of countries here

The idea of DTAA is basically that you are already paying tax in your country of residence and now you are again being taxed in India. So, it is being taxed two times and hence you must get a lower benefit somewhere. It's difficult to understand the agreement, because though the DTAA has been signed with countries like UAE and Oman, there is no income tax or any other form of tax there. Not sure what was the basis of including these countries in the list.

Nonetheless, if you are residing in one of the countries mentioned in the list, you can reduce your TDS liability by handing over the following:

DTAA Disclosure

1) You have to make a declaration that you are a Non Resident Indian during the year in which tax is sort to be deducted and that you do not have any permanent establishment in India.

2) Original or certified true copies of the tax residency certificate from income tax authorities to be obtained from the client.

3) Self attested copy of passport & visa. (not required in case the client is submitting Tax Residency Certificate).

If you are residing in UAE or Kuwait you must give a photocopy of the passport pages which give the details of entry and exit. (this it to ascertain 183 days stay in a calendar year for UAE and 183 days in a financial year for Kuwait).

Read more about: nris, dtaa, nro savings
Story first published: Friday, July 4, 2014, 9:58 [IST]
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