One of NRI client have NRE deposits which were kept when he was a Non-Resident.The NRI client shifted to India to settle here. The status of NRI client was resident for the current year and NRE deposit matured in the current year. Whether exemption u/s 10(4) of Income tax Act,1961 will be available for the NRI client? Whether interest on the above deposit is taxable?
Interest earned from NRE deposits account shall be exempted from tax u/s. 10(4)(ii) and exemption shall be available untill NRI/PIO becomes person resident in India (Section 2(v) of FEMA).
As per said section, when an NRI/PIO return to India for good, he needs to re-designate his non resident account to resident accounts i.e. NRE to either Resident Foreign Currency or Resident Saving Account, and so shall be considered as Resident for FEMA.
So, technically speaking, Interest earned from NRE Account shall be exempted irrespective of his Residential Status as per Income Tax.
CAclubindia
