Foreign fd maturity

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Querist : Anonymous

Querist : Anonymous (Querist)

16 May 2015 A person had invested in an FD in New Zealand in the year 2010. In the current year i.e 2014-2015 the said Fd matured and the amount due was first received in the new Zealand bank account and on the next day transferred to an Indian NRE account. How is the Forex gain to be accounted for and taxed. Kindly specify the relevant sections and provisions of the IT Act,1961.

CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)

16 May 2015 it will be income from other sources under indian income tax act only for resident indian as per it act 1961, if he is non resident then such income is not taxable.

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Querist : Anonymous

Querist : Anonymous (Querist)

16 May 2015 could you8 please tell me the relevant sections?

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)

25 July 2024 In the scenario described, where an FD in New Zealand matures and the proceeds are transferred to an Indian NRE (Non-Resident External) account, the taxation would be governed by the provisions of the Income Tax Act, 1961, particularly under the sections dealing with foreign exchange transactions and taxation of foreign income. Here’s how it would typically be treated:

### 1. Forex Gain Calculation:

When the FD matures, the amount received in New Zealand dollars (NZD) needs to be converted to Indian Rupees (INR) for reporting in the Indian tax return. The forex gain or loss arises due to the difference in exchange rates between the date of initial investment and the date of maturity.

### 2. Taxation of Forex Gain:

- **Section 45 of the Income Tax Act, 1961:** This section deals with the taxation of capital gains arising from the transfer of a capital asset. In your case, the FD would be treated as a capital asset. The gain is computed by deducting the cost of acquisition (in INR terms, after converting the NZD amount) from the amount received.

- **Section 48 of the Income Tax Act, 1961:** This section provides the method of computation of capital gains. The cost of acquisition for the FD would typically be the INR equivalent of the amount invested in NZD at the time of purchase in 2010.

### 3. Reporting and Tax Implications:

- The gain (if any) would be taxable under the head of "Income from Other Sources" or "Capital Gains," depending on the nature and period of investment.
- The taxpayer needs to report the forex gain in their Indian Income Tax Return (ITR) for the relevant assessment year (AY).
- Ensure compliance with FEMA (Foreign Exchange Management Act) regulations regarding the repatriation of funds from abroad to India.

### Example Calculation:

Assuming:
- Investment in 2010: NZD 10,000 (INR equivalent at that time: say INR 4,00,000)
- Maturity proceeds in 2014-15: NZD 12,000 (INR equivalent at that time: say INR 5,00,000)

Forex Gain: INR 1,00,000 (INR 5,00,000 - INR 4,00,000)

This forex gain of INR 1,00,000 would be taxable as per the applicable tax rates in the assessment year in which the FD matures and the proceeds are received in India.

### Conclusion:

Consulting with a tax advisor or chartered accountant would be advisable to accurately compute the forex gain and ensure compliance with the provisions of the Income Tax Act, 1961, and other applicable laws. They can also guide on any available exemptions or deductions that may apply based on individual circumstances.

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