Returning NRI to India for permanente settle and NRE fixed deposit interest taxability

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An NRI planning to return to India permanently after 29 years abroad is seeking clarity on the taxability of interest from their NRE fixed deposit. They understand that upon returning and gaining Resident and Ordinarily Resident (R&OR) status, NRE accounts might be exempt for a few years. However, the discussion clarifies that NRE accounts are permitted as long as one is a non-resident under FEMA. Upon permanent return, the NRE status ceases, making the interest taxable as an ordinary FD. FCNR interest is also confirmed as taxable in this scenario.

Anand Prakash Garg

Anand Prakash Garg (Querist)
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23 April 2024 NRI who is staying oversees 29 years and wants to return to India for permanent settlement.

He holds NRE deposit in Bank in India. How is taxation on interest on NRE fixed deposit, assuming that on return to India , he will gets R&OR status.
Is interest from NRE fixed deposit exempt for next 2-3 years after becoming RFC account.
Is FCNR interest is exempt in this case.

Regards

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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24 April 2024 It's taxable as soon as return to India permanently NRE status goes off, it will be ordinary FD taxable.

Anand Prakash Garg

Anand Prakash Garg (Querist)
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24 April 2024 I understand that R&OR status apply if NRI stays oversses above 10 years, as he staisfy condition
that out of last 10 previous year, he is NRI for 9 years etc.
In Resdient & ordinary resident status, your NRE Fixed deposit interest is exempted for 2-3 years till you maintain R&OR status.
Is my understanding wrong?

What about FCNR depsit interest taxablity.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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24 April 2024 Your understanding is not right.

A person can have an NRE account as long as one is a non-resident under the provisions of Foreign Exchange Management Act (FEMA). A non-resident becomes a resident under FEMA as soon as he comes back to India for good or for an indefinite period.

FCNR interest is taxable.

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