NRIs are not eligible to file Form 15G/15H

Can a non resident Indian (NRI) give Form 15G/H to a bank so that bank does not deduct tax on interest on his deposits. And if the bank deducts tax then what will be the best option for an NRI?    —Rahul
Form 15G is meant for non-senior citizens whereas Form 15H is meant to be used by senior citizens. If this form is submitted by the deposit holder in respect of his deposit, the bank does not deduct tax while paying interest. There are some conditions which, if the deposit holder complies with, these forms can be submitted.

However, both the concept of a senior citizen as well as submission of these forms are not applicable in case of NRIs. In other words, NRIs, irrespective of their age, are not eligible to file Form 15G or 15H as the case may be.

Consequently, it happens so often that the bank withholds tax (applies TDS) even if the overall income of the NRI depositor is less than the basic exemption limit for taxation i.e. Rs160,000. In this situation the best course of action would be to file the tax return and claim a refund of the extra amount of tax deducted.

I have invested ¤4 lakh in a debt fund in 2005. This year the value of the investment stood at Rs7 lakh. What is my tax implication? I presume that the fund house has deducted the dividend distribution tax but the same has not clearly been mentioned. They say over phone that as per the Sebi rules they have deducted the same. Do I have to pay capital gains tax? — Shetty
The amount invested by you in 2005 has grown by Rs3 lakh. This is over and above the dividends that you would have received, assuming you have chosen the dividend option. Dividend distribution tax is deducted before paying the investor the amount of dividend. Now since the investment is in a debt fund, this profit of Rs3 lakh would indeed be subject to long-term capital gains tax.

The rate is either 10% without indexation of cost or 20% after cost indexation. You can save this capital gain by investing it in capital gains tax saving bonds. The other way of saving this tax is by investing the net sale proceeds in a residential property. However, the size of the funds is too small for the latter option — the best course of action would be to buy the bonds.

The writer is director, Wonderland Consultants, a tax and financial planning firm. He may be contacted at sandeep.shanbhag@gmail.com