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Q : I am currently working in UK on a client site for last 1 year. I have one NRE account. My query is "If I transfer money from my NRE account to my wife's account (in India), will she need to pay tax on that amount? If I transfer the money from my NRE account to my wife's account (In India) and she uses this money in a fixed deposit, then how much tax would she need to pay? Is there any upper limit to transfer the money in my wife's account?
A: There will be no tax incidence either on you or on your wife resulting from
the transfer of funds from your NRE account to your wife's account in India.
However, if she were to invest the funds (open a Fixed Deposit as per information provided), the income / interest from the investment will be clubbed and taxable in your hands.
There is no upper limit on the amount that you can transfer to your wife's account.
Q :I propose to remit US$20,000 to my mother in India through my NRE account in India by way of gift. She proposes to invest in term deposit in Indian bank in her name. She has no other income in her name and hence the interest she earns will earn from the TDR will be below the taxable limit. Can she after one year remit the entire amount to me for my maintenance expenses? I understand a sum of $200,000 a year can be remitted that way. I will be grateful if you favour me with a reply.
A : There would be no
tax incidence on either you or your mother upon gifting to each other any sums
of money. You are correct in observing that she can remit the entire amount
back to you for maintenance expenses. The limit for maintenance expenses, however,
is US$100,000 and not US$200,000. The US$ 200,000 limit is for investments
abroad including gifts and donations. So technically she can remit to you US $300,000 p.a. which includes US$ 100,000 as maintenance expenses and US$ 200,000
as a gift.
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