20 October 2017
Interest on NRE accounts/deposits (re-designated as resident rupee account/deposit) becomes taxable on your return. If you transfer the balance to RFC account, the interest income will become taxable or exempt as per rules for RFC account.
Interest on FCNR deposit will remain tax-free if the returning NRI remains RNOR (Resident but not Ordinarily Resident). As and when you become ROR (Resident and Ordinarily Resident), even interest on FCNR deposit is taxable.
Interest on RFC account/deposit is exempt from tax as long as you are RNOR.
28 November 2017
Exemption under section 10(4)(ii) is available only if such individual is a person resident outside India as defined in clause (q) of section 2 of the said Act or is a person who has been permitted by the Reserve Bank of India to maintain the aforesaid Account.
What is meaning that " person who hs been permitted by RBI......? Plz suggest
03 August 2024
### **Tax Treatment of NRE FD Interest for RNOR Status**
**1. **Understanding RNOR Status:**
- **Resident but Not Ordinarily Resident (RNOR):** An individual who meets certain criteria can be classified as RNOR under Section 6 of the Income Tax Act, 1961. This status affects how foreign income and assets are treated for tax purposes.
**2. **Exemption for NRE FD Interest:**
- **Section 10(4)(ii):** According to this section, interest earned on NRE (Non-Resident External) Fixed Deposits (FDs) is exempt from income tax in India, provided that the individual is a Non-Resident Indian (NRI) or a Person of Indian Origin (PIO) who meets the conditions stipulated in this section.
- **Relevance to RNOR Status:** - **Interest Exemption:** For a person classified as RNOR, the exemption under Section 10(4)(ii) is not applicable. The interest earned on NRE FDs is exempt only for individuals who are classified as NRIs. - **Taxability for RNOR:** If an individual is classified as RNOR, interest earned on NRE FDs is not eligible for exemption and is subject to tax in India.
**3. **Meaning of "Permitted by RBI":**
- **RBI Permission:** The phrase "person who has been permitted by the Reserve Bank of India" means that an individual who maintains an NRE account must have the RBI's permission to do so. This typically applies to NRIs and PIOs who are allowed to open and maintain NRE accounts under the Foreign Exchange Management Act (FEMA).
**4. **Relevant Notifications/Sections:**
1. **Income Tax Act, 1961:** - **Section 10(4)(ii):** Provides tax exemption on interest earned from NRE accounts for NRIs. - **Section 6:** Defines the conditions for RNOR status.
2. **Foreign Exchange Management Act (FEMA):** - Governs the regulation of foreign exchange and the conditions under which NRIs and PIOs can maintain NRE accounts.
**5. **Summary of Exemption Status:**
- **NRE FD Interest for NRI:** Exempt under Section 10(4)(ii) if the individual is a Non-Resident Indian. - **NRE FD Interest for RNOR:** Taxable in India, as the exemption is not available to RNORs.
**6. **Consultation:**
- **Professional Advice:** For accurate and personalized advice, it is advisable to consult a tax professional or chartered accountant who can provide guidance based on the specific details of your situation.
### **Conclusion:**
Interest earned on NRE FDs is exempt from tax for individuals classified as NRIs. However, if you are classified as RNOR, this exemption does not apply, and the interest earned will be taxable in India. The exemption under Section 10(4)(ii) is specifically for NRIs and those who have RBI permission to maintain an NRE account.
CAclubindia
