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Offshore Banking Unit |
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Taxation
The taxation implications as
per the prevailing tax laws are enclosed for your ready reference:
1) Taxation (Non-Residents
(NRs)
No TDS will be applicable on interest paid/ payable to NRIs
depositors in accordance with and subject to the prevailing
provisions of section 10(15)(iv)(fa) of the Income-tax Act,
1961.
2) Taxation (Other
than NRs)
1.
What is the standard TDS rate for interest on FCIDs?
Product Features
1.
Penalty on premature withdrawal.
2. How is interest calculated in case of premature
withdrawals?
3. Is partial withdrawal of deposits allowed?
4. If the customer becomes a resident after
some time, can he still maintain his deposits in the OBU?
5. Can the customer view his accounts using
Internet Banking ID?
6. Is interest compounded quarterly or annually?
7. Can Indian residents invest in FCIDs?
8. Can OCBs invest in FCIDs?
9. Can Foreign Residents invest in FCIDs?
10. Are we offering
this period for any period between 1 year to 2 years, 2
years to 3 years, etc.
11. Does the OBU accept
remittance/draft in currency other than the currency of
the deposit?
Process
1.
What happens if the customer does not give the fax indemnity?
2. Do we charge for
sending funds from DBU to OBU and vice-versa?
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Taxation
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What is the standard
TDS rate for interest on FCIDs?
As per the provisions of section
10(15)(iv)(fa) of the Income-tax Act, 1961 any interest on
deposits in foreign currency paid to non resident or resident
but not ordinarily resident in India is exempt from tax. Hence,
no TDS is applicable provided the declaration in the specified
format is given by the client confirming the non resident
status. In the absence of above
declaration, the standard TDS rate is 20% plus applicable
surcharge and education cess @ 2% for interest on all deposits
placed in foreign currency. The rate of surcharge varies
as per the type of the depositor eg. 2.5% in case of offshore
companies, 10% in case of funds / trusts etc. |
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Product Features
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Penalty
on premature withdrawal
Presently, the penalty of premature withdrawal is as
follows:
Applicable rate (for the period deposit is held, in case period
is fractional then of previous slab) less 75 bps for all tenors
and amount. The premature penalty rate would be as applicable
at the time of opening the deposit, and not at the time of
withdrawal. |
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How
is interest calculated in case of premature withdrawals?
We will see this with an example. Suppose the client invests
USD 2 million for tenure of 2 Years On expiry of 4 months
he withdraws entire amount, the rate of interest payable to
him would be as follows:
Rate of interest for the previous slab (in this case previous
slab is 3 months) minus applicable penalty. |
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Is partial withdrawal
of deposits allowed?
Partial withdrawal is allowed
from these accounts, subject to a minimum partial amount of
$ 1000/-
The interest treatment in this case is based on the residual
method. We will understand this with the following example:
In above example, if a customer withdraws USD 1.95 million,
then interest on remaining balance of USD 50,000/- would be
on the lower slab. |
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If the customer
becomes a resident after some time, can he still maintain
his deposits in the OBU?
He can maintain the deposit
till maturity. |
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Can
the customer view his accounts using Internet Banking ID?
No. As of now, the FCIDs are not linked to Internet Banking.
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Is
interest compounded quarterly or annually?
Interest is compounded annually for deposits with tenure greater
than 1 year, and on simple interest rate bases for deposits
with tenure less than 1 year. |
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Can
Indian residents invest in FCIDs?
No. |
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Can OCBs invest
in FCIDs?
No. |
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Can Foreign residents
invest in FCIDs?
Yes. |
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Are
we offering this period for any period between 1 year to 2
years, 2 years to 3 years, etc.
No, the product is only offered for 3, 6, 9 months, 1, 2,
3, 4, 5 and 6 years with no tenures in between. |
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Does the OBU accept
remittance/draft in currency other than the currency of the
deposit?
OBU -SEEPZ does not accept any remittances/drafts/cheque other
than the currency of deposit for deposits of value less than
USD 50,000 or equivalent foreign currency. |
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Process
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What happens if
the customer does not give the fax indemnity?
The
customer can choose not to sign the indemnity letter together
with the account opening form. In this case, all transactions
would be processed only on receipt of the original documents.
This could mean a delay of some days and hence a loss in interest
rate to the client in case rates fall. |
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Do we charge for
sending funds from DBU to OBU and vice-versa?
Currently, there is no charge for transferring funds from
the DBU to the OBU and vice-versa. |
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