Interest on nre a/c n nre f.d

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

18 December 2012 NRI returned to India on may 2011 for permanent settling back to India and his NRI status is changed to Normal Resident .
He has NRE a/c with balance of INR 100,000 and NRE FD of INR 150,000.

On both , interest is earned . Now, questions are as under:

1. Interest on NRE A/c of INR 100,000 – Is such interest taxable or tax free . if taxable, under what section

2. Interest on NRE FD of INR 150,000– Is such interest taxable or tax free . if taxable, under what section

3.If interest is earned NRE Fd of INR 104,000 created (Nre a/c bal of INR 100,00 and Interest of INRT 4000) on june 2012 - Is such interest taxable or tax free . if taxable, under what section

@VaibhavJ

@VaibhavJ (Expert)
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18 December 2012 Hi

Interest earned under NRE a/c is exempt.

Even though interest earned is INR 4K which is exempt u/s 80TTA upto 10k for resident individual.

So no worries for taxing of Interest.

Thanks//Vaibhav
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Querist : Anonymous

Querist : Anonymous (Querist)

18 December 2012 Can u provide any material for reference like section or something.

and thank u for ur answer.

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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01 August 2024 For an NRI who has returned to India and is now a resident, the tax treatment of interest earned on NRE accounts and NRE fixed deposits (FDs) changes. Here’s how it works:

### 1. **Interest on NRE Account**

**Interest Earned Before Returning to India:**
- **Tax-Free:** Interest earned on an NRE account while the individual was a non-resident is tax-free in India. This applies to both the principal and interest.

**Interest Earned After Returning to India:**
- **Taxable:** Once the individual returns to India and becomes a resident, the interest earned on the NRE account from the date of returning is taxable.
- **Taxable Under:** Section 10(4) of the Income-tax Act, 1961 provides tax exemption on interest earned in NRE accounts for NRIs. However, this exemption does not extend once the individual becomes a resident.

### 2. **Interest on NRE Fixed Deposit (FD)**

**Interest Earned Before Returning to India:**
- **Tax-Free:** Similar to the NRE savings account, interest earned on NRE FDs while the individual was an NRI is tax-free in India.

**Interest Earned After Returning to India:**
- **Taxable:** The interest earned on NRE FDs after the individual becomes a resident is taxable in India.
- **Taxable Under:** Section 10(4) of the Income-tax Act, 1961 does not apply to residents. Hence, the interest earned on NRE FDs post-residency is subject to tax under the head "Income from Other Sources" as per the applicable tax slabs for residents.

### 3. **Interest on NRE FD Created After Returning to India**

**Interest Earned on FD Created After Returning:**
- **Taxable:** If the NRE FD was created after the individual returned to India and became a resident, then the interest earned on such FD is taxable.
- **Taxable Under:** The interest should be included in the "Income from Other Sources" and taxed according to the individual's applicable tax slab.

### **Material for Reference:**

- **Section 10(4) of the Income-tax Act, 1961:** This section deals with the exemption of interest on NRE accounts for NRIs. It clarifies that this benefit is not available once the individual becomes a resident.

- **Section 56 of the Income-tax Act, 1961:** This section covers taxation of income from other sources, which includes interest income from savings and fixed deposits for residents.

- **Income Tax Act, 1961 (latest amendments and notifications):** Refer to the Income Tax Act for the most current provisions and rules applicable.

### **Summary:**

1. **Interest on NRE Account (before becoming resident):** Tax-free. (After becoming resident): Taxable.
2. **Interest on NRE FD (before becoming resident):** Tax-free. (After becoming resident): Taxable.
3. **Interest on NRE FD (created after becoming resident):** Taxable.

For accurate tax filing and compliance, consider consulting a tax professional or financial advisor who can provide personalized advice and help with your specific situation.