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Treatment of non-residents’ liability on Indian investments

If the reader’s son has become a resident in the U.S. within the meaning of Article 4 of Indo-U.S. Double Tax Avoidance Agreement, he is entitled to the benefit of tax relief under Article 11 of the said Agreement in India, if he were a non-resident under the domestic law in India. Tax rate on bank deposits is 10 per cent. It does not include surcharge since the rate prescribed in the Agreement does not provide for the same. Duty to file return, if the taxable income exceeds the limit, is, however, unavoidable even if the non-resident has no other income except interest from fixed deposits. Exception has been provided only in respect of Sec. 115A(5), which spares the duty to file return for non-resident foreign companies with income only from dividend, royalty and technical services fees, if tax has been deducted at source under this section. There is a case for enlarging this benefit in much simpler cases like those non-residents only with interest income.

S. RAJARATNAM

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