Investing, Taxation and Loan Query

POSTED BY Ashish P. ON June 13, 2012 12:12 pm COMMENTS (2)

I currently own a proprietor firm which provides services to US based businesses & receive my income in USD cheques, which I deposit in my Indian Bank Account and is remitted in rupees. I fall in the 30% bracket since the last couple of years. However, I will be shifting abroad for my Masters in Sep 2012 for a minimum period of 2 years. However, I expect the income to flow through during my course of studies and will remain in the 30% bracket.
My questions are:
1) What kind of bank account do I need to setup to ensure that my deposits are made properly and I can use it abroad as well.
2) Does it make sense to take an education loan? I can pay the entire expenses of the education , around 20 Lakhs, using my savings. However, I am thinking that will i get tax deduction and benefit more by paying off a loan, taking into account the tax savings.
3) What kind of taxation will I fall under from next year (NRI??) after my shift and how do I plan it.
4) I would like to continue investments [deposits, funds etc] even when I am abroad studying to build my corpus. What do you suggest for this?
5) I have applied to HDFC Click2Protect term insurance and have undergone medicals, and hopefully will receive the policy before I leave abroad. I have specified to them that I will be going abroad in my application. Are these policies valid outside India? I am asking this since I further intend to take a 50L policy with LIC as well.
Thank you for your time and consideration.

2 replies on this article “Investing, Taxation and Loan Query”

  1. Ashish P. says:

    Hi Ashal,

    Thanks for your detailed answer:

    I read this somewhere and am a bit confused “As per current guidelines, funds in NRE Savings Account are exempted from Income tax in India.” does that mean all my remitances will be non taxable once I begin depositing my cheques in this account.

  2. Dear Ashish, I’m trying to answer your queries.

    1. NRE account is the one as you want to use that money abroad also.

    2. From Taxation point of view, Education loan is beneficial. As you are in 30% tax slab & normal rate of interest for education loan ‘ll be around 13% or even more, you can expect a good saving in tax.

    3. Basic taxation of American income ‘ll remain same as you are out of India not for employment but for education.

    4. Please continue with your investments as it as like you are in India. Just update your status from RI to NRI. Yes this NRI updation may invite TDS at higher rates but that ‘ll help you to pay your tax automatically.

    5. Yes once taken, these policies are valid even outside India also.



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