Interest earned by R & OR on NRE FDs.

This query is : Resolved 

24 January 2023 Individual has been working abroad since 2005. On 31 Mar 17 he left India again he came to India on 03 Jun 17 & left India on 6th oct 2017 again he came back to India on 5th Dec. 2017 & left India on 10th Feb 2018. So around 194 days he was in India for 2017-18. He is leaving India for employment & also coming to India not for employment. So I think he satisfied both the conditions; he was a person resident outside India as per FEMA for full year even though he stayed in India for more than 182 days. That means as per section 10(4)(ii) of income tax; interest earned on NRE deposits is exempt even though he is R&OR ? Plz reply

25 January 2023 NRE deposits converted as resident deposit on becoming resident and it's taxable.

25 January 2023 Seetharaman sir; small correction from my side. To check the residential status as per FEMA; we need to check the no. of days stays of preceding financial year. That is for FY 2017 18 we need to check the no. of days of 2016 17. In 2016 17 he stayed for less than 182 days means he is PROI as per FEMA for 2017 18. So interest is exempt as per section 10(4)(ii) ?

25 January 2023 You have to check as per income tax not as per FEMA.
NRE deposits taxable when a person permanently come to India.
Temporary visit not to be considered.

25 January 2023 But sir as per 10(4)(ii) of income tax act; if he is NR as per FEMA then interest is exempt.

25 January 2023 Once you come back to India permanently, you are a resident as per FEMA. And residents are not permitted to keep a NRE account. Interest on NRE FD is tax exempted only for Non-Residents. Therefore from the day you come back to India any interest earned in NRE FD becomes taxable in your hand.

25 January 2023 Yes sir thank you; understand. Means if he came to India on vacation & again he went out for employment. In such case even he is R & OR as per IT Act & PROI(NR) as per FEMA Act then interest will exempt ?

25 January 2023 Yes, you are right.......

25 January 2023 Ok thank you very much sir 👍

25 January 2023 You are welcome....


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