TMI Blog1996 (3) TMI 560X X X X Extracts X X X X X X X X Extracts X X X X ..... resently, the appli- cant is not assessed to tax in India. During the period of his service with the American company, the applicant entered into an individual retirement arrangement ( IRA ) with SIS, a banking institution, and a subsidiary of an American bank. Under section 408(a) of the United States Internal Revenue Code, the IRA is a trust account of which SIS is the custodian. Broadly speaking, contribu- tions made to the IRA by employee-members are tax deferred (i.e., they are tax deductible at the time of contribution but liable to tax at the time of their withdrawals by the applicant in due course). The applicant became a contributor to the plan in 1984. From time to time, funds in US dollars constituting part of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h account will have to be made by SIS acting as IRA custodian for the applicant. It will be seen from the above statement of facts that the applicant proposes to have an account with the bank in India in the name of SIS to which will be credited all withdrawals made by him from time to time from his IRA in Indian rupees and will be earning income therefrom by way of interest. In this context, two questions are facing the applicant on which he seeks a ruling from this Authority, particularly because, some time after coming back to India, he will cease to be a non-resident and will be either a resident but not ordinarily resident (R-NOR) or a resi- dent and ordinarily resident (ROR) . The applicant wishes to know whether d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance rulings on questions relating to taxes levied under other enactments on which this set of provisions has not been engrafted. The Authority is, therefore, unable to give any ruling on the third question raised by the applicant. To take up next the second question which pertains to the taxability of the withdrawals made by the applicant from his IRA account from time to time in the NR-NR-RD account and the interest earned thereon. In the opinion of the Authority, no tax will be payable in India by the applicant on such withdrawals whatever the residential status of the applicant at the relevant time may be since these withdrawals do not at all constitute income in his hands. The amounts lying in the IRA account with SIS i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 (AAR)). It is only when a fairly long time has passed and the applicant becomes ROR-both resident and ordinarily resident in India-that the income accruing thereafter in his IRA account in the States may become taxable on accrual basis. As already indicated, this may be only after a period of about ten years and on the assumption that the IRA account continues till then without the applicant having withdrawn the entire amounts standing to his credit in that account. The second question raised by the applicant is answered accordingly. This takes one to the consideration of the first question raised by the applicant and this pertains to the interest on the applicant s invest- ments, in India, of funds withdrawn from his IRA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the Act a trustee or a custodian can be taxed for the income accruing to or received by or on behalf of a beneficiary but such assess- ment will have to be made in the same manner and to the same extent as if the assessment were being directly made on the beneficiary himself. That being so, the income earned in the NR-NR-RD account, though exempt from tax in the hands of SIS, will be liable to tax in the hands of the applicant (or of SIS as his trustee or custodian) once he ceases to be non- resident in India. The first question is answered accordingly. For the reasons discussed above, the Authority pronounces the follow- ing ruling on the three questions raised by the applicant in paragraph C of his application: ..... X X X X Extracts X X X X X X X X Extracts X X X X
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