Can non-residents submit Form 15G for the receipt of interest income without the deduction of tax at source? Is it mandatory to inform the banks about the change in residential status? Today's Ask Wallet Wise query decodes the tax treatment of non-residents.
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My son was in India till 15th July 2024. He went to the UK for his further studies. He is receiving some financial assistance from the university as a teaching assistantship, for which he has to assist professors in teaching and evaluation. He pays tax in the UK on the assistantship money received. There are various fixed deposits in his name in India, made a long time back. His total interest exceeds the basic exemption limit, and therefore, we are planning to file his ITR in India.
Is he a non-resident for IT purposes for FY 2024-25? If he is a non-resident for tax purposes, can he claim a deduction under Section 80TTA for interest on savings accounts? Can he submit Form 15G for the receipt of interest income without the deduction of tax at source?
Expert Advice: Since he was in India for less than 182 days, he will be treated as a non-resident for income tax purposes. The deduction under Section 80TTA is available to an individual and an HUF, whether resident or non-resident, so he can claim the benefit under Section 80TTA in respect of interest earned on savings bank accounts, provided he opt for the old tax regime.
The TDS rate will vary depending on whether one is a resident or non-resident at the time of credit of the income, and not when the money was invested. Since he is a non-resident for tax purposes, he cannot submit Form 15G. 15G /15H help taxpayers avoid TDS deductions on their income from interest earned on fixed deposits, recurring deposits, etc. The rate of TDS for non-residents on bank interest, including interest credited in the savings bank account, is 30%.
I would advise you to intimate the bank about the change in his residential status. It is always better to be on the right side of the law than face the consequences, even if he intends to return within a few years. As per law, it is mandatory to inform the bank about the change in residential status, and the bank will re-designate his existing fixed deposits and savings bank account as an NRO account.
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