Sunday, May 20, 2012

Bharat Maata Ki …


We are writing to inform you of important changes on Tax Deduction at Source (TDS) on the interest you earn on your Citibank Non-Resident Ordinary (NRO) deposits.

Under the taxation laws in India, we are required to withhold tax on the interest paid to you on your NRO deposits. This TDS is deducted at a rate of 30.9% (Tax + CESS) -  however until March 31, 2012, for customers who provided a declaration to avail of the benefits under the Double Taxation Avoidance Agreement (DTAA), this rate was lower based on the country of residence.

As per the provisions of the Finance Bill, 2012, DTAA benefits can now only be extended to individuals submitting a valid 'Tax Residency Certificate' (TRC) in a format specified by the Indian Revenue authorities and authorised by the Tax Authority in the country of your Tax Residency. The bill is scheduled to be tabled in May 2012 and will be enforced retrospectively from the 1st of April, 2012.

The Indian Revenue Authorities have not specified the new TRC format as yet. Consequently, tax will be withheld at 30.9% (Tax + CESS) on interest paid on your NRO deposits until such time the Indian Revenue Authorities provide us with the revised TRC format and you provide us copies of the new format, authorized by the appropriate Tax Authorities in the country of your Tax Residency. Please note that once you provide the revised TRC, the lower tax deduction will only be effective for future interest payments.

We will share the specified TRC format with you once Indian Revenue Authorities release the same.

We also wish to inform you that in case you have provided a DTAA Declaration recently for the Financial Year - April 2012 - March 2013 (Tax Assessment Year - April 2013-March 2014), we will not be able to process the instructions.

Thank you for your understanding. If you need any clarifications, please call CitiPhone or your Relationship Manager.

Warm regards
Citibank NRI Business

Basically what they are saying is:

  • If you were eligible for lower TDS (as per DTAA), you are no longer eligible (effective April 1st) because of a Finance Bill which will be tabled in May 2012.
  • Your TDS will be deducted at 30.9% regardless of DTAA or your NRI Status declaration.
  • You will continue to pay a higher TDS (as opposed to what you ought to) until the TRC format has been finalised by the Indian Tax Authorities (which is obviously not under the customer's control).
  • Once the idiots in the Indian Administration agree on the TRC format, you will then have to complete the new paperwork / formalities and submit them again to your respective banks.
  • Until this is done, TDS will continue to be deducted at the higher rate.
  • Once you have submitted the documentation, the higher TDS that they have been deducting will NOT BE REVERSED and lower TDS will be applicable only for FUTURE INTEREST PAYMENTS (Gali gali mein shor hai… Bharat Maata chor hai).

I don't blame Citibank for this. At least Citibank bothered to inform the customers. I am yet to receive any such notification from the other banks that I (unfortunately) maintain Rupee Deposits with.

I do blame the Indian Revenue Authorities (rolls eyes). The customer will have to pay a higher tax – for no fault on his/her part. What nonsense!?

I have sent emails to the other banks inquiring about this and how they propose to handle the issue. No reply, yet.

To be completely honest – I would gladly settle for a significantly lower interest rate than pay these bastards a single paisa more than I absolutely have to. Call me unpatriotic if you want to – I don't think much about the concept of patriotism anyway.

I would happily pay a penalty at pre-mature liquidation of my NRO deposits AND pay the CA's their ridiculous fee to get an affidavit - enabling me to convert my NRO cash to NRE. I will place it at lower interest rates, but I will NOT pay a higher tax because some dumb fuck wants to use a new format!

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