The year u become resident in india, the income tax is leviable on interest
on NRE Deposit
S. 10(4)(ii) of the Income-tax Act, 1961 (the Act) provides that in case of an individual, any income by way of interest on monies standing to his credit in Non-Resident (External) Account [N.R.(E) Account] in any bank in India in accordance with Foreign Exchange Regulation Act, 1973 (the FERA) and the Rules made thereunder is exempt. The exemption is available only if such an individual is a ‘Person Resident Outside India’ as defined in the FERA or if such a person is permitted by the Reserve Bank of India (RBI) to maintain such an account.
Further interest on Foreign currency deposit is exempt u/s 10(15)(iv)(fa)
Section 10(15)(iv)(fa) in The Income- Tax Act
Interest earned is exempt
(fa) 1 by a scheduled bank 2 to a non- resident or to a person who is not ordinarily resident within the meaning of sub- section (6) of section 61, on deposits in foreign currency where the acceptance of such deposits by the bank is approved by the Reserve Bank of India. Explanation.- For the purposes of this item, the expression" scheduled bank" shall have the meaning assigned to it in clause (ii) of the Explanation to clause (viia) of subsection (1) of section 36;]
A person is an RNOR if he meets either of these two conditions: -He/she has been non-resident in India, that is, an NRI, in nine out of the ten previous years preceding that year, or -He/she has, during the seven previous years preceding that year, been in India for a period of 729 days or less
Conclusion: The year u become resident in india u shall have to pay tax on interest income on nre deposits as well
However, if u r RNOR (resident but not ordinarily resident) then u dont have to pay tax on FCNR deposits .
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