We are planning to move to Australia. We have investments in FDs, PPFs, EPFs, mutual funds, stocks and liquid funds. Should we now invest these instruments in a non-resident external account (NRE) or non-resident ordinary account (NRO) or can we let them last until their maturity?

— Name masked on request

Under the Exchange Control Act, when a person leaves India for employment, business or vocation outside India or for any other purpose indicating his intention to remain abroad for a uncertain period, its existing resident bank account should be designated as an NRO account. An NRE account can be opened again. Residence status under exchange control laws is different from that under income tax laws.

Thus, you need to convert your existing resident bank accounts (savings and term deposit) to NRO account.

As a non-resident Indian, the PPF account can be maintained until maturity on a non-repatriation basis (no remittance outside India) and the account will be closed upon maturity. For mutual funds and shares, you will need to notify the change of residential status to the fund house and the Indian company respectively.

My son lives in Canada and sends 25,000 each month to his mother to pay the monthly installment of a car loan. Is this amount taxable? Also, does my wife have to show or declare it on her tax return (ITR)?

— Name masked on request

Under India’s Income Tax (IT) Act, funds transferred from outside India by a son to his mother’s savings account in India will not affect the income tax in india. As the transfer is not taxable in India, there is no need to declare it in the ITR in India.

Sonu Iyer is Tax Partner and Head of People Advisory Services, EY India.

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