Interest from NRE account is exempt from tax

—Name withheld on request

Interest income from an NRE account is exempt from tax in India for NRIs. However, such income may have to be clubbed with your total income reported in the UK, according to local tax laws. It is recommended that you seek assistance from an expert to identify the tax implications of earning an interest income outside of the UK and whether any benefits are available to you under the Double Tax Avoidance Agreement.

I am an NRI. I have an NRI account in India, in which I keep my savings. From this account, I transfer a fixed amount every month to my wife’s savings account. She has no income of her own. She has a demat account in India and invests in stocks. Will tax be levied on this savings account if any interest is earned from the amount received from me? What would be the tax liability in case of capital gains from the stocks? In the above two cases, should I need to file any income tax return in India as an NRI? If yes, what is the correct ITR for an NRI to be filed?

—Name withheld on request

A gift of money made to a specified relative in India is exempt from tax. Your wife is covered under specified relatives as per the Income Tax Act, therefore the money transferred by you shall not be considered as an income for your wife. So long as this money is transferred to meet regular expenses, there is no tax implication for you or for your wife. However, if this money is invested in shares to earn an income, such income may have to be clubbed with your income and reported in your income tax return filed in India. The rules regarding taxation of capital gains shall remain the same as applicable to an NRI, since this is being considered as part of your total income. Any interest income from the savings account is also likely to be clubbed along with your total income. If your total income taxable in India exceeds ₹2.5 lakh, you must file an income tax return in India and include the income mentioned above. Depending upon the other types of income you have, you will have to e-file ITR-2 in India.

Archit Gupta is founder and chief executive officer, ClearTax. Queries and views at mintmoney@livemint.com