The Indian interest income of non-residents may soon be subject to taxation in line with domestic deposits following a recommendation by an internal group of the Reserve Bank of India.
Non-resident deposit schemes with tax and interest benefits have been introduced at various times by the Indian authorities in order to attract foreign exchange funds and help reduce India’s external debt.
However, the report explained that as there is no longer such a pressing need to attract foreign exchange, these tax benefits on non-resident accounts are no longer so necessary.
The report also concluded that: “NRI deposits pose potential problems for policymakers in times of crises, when they display a high degree of volatility irrespective of maturity constraints.”
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