An army Major was sent on UN assignment. He opened an NRE account in SBI prior leaving. All allowances received from UN remitted in that account. He made an FD out of balances so accumulated in the account on 4.1.2007. By 31st July his assignment was over and came back to India and joined the Army. On 4th January the FD matured and got encashed. He received an Interest of about Rs.50,000/- Please clarify: Is he liable to pay income tax for the interest? If the answer is yes a) interest earned after returning to India or the whole interest is subjected to Tax.
31 July 2008
For the Financial year 2006-07, he may be a non-resident. If so, Interest earned for that financial year on NRE deposit is not taxable. But for financial year 2007-08 he is resident. The interest is taxable.
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