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Interest on NRE deposits

Gautham (Auditor) (80 Points)

29 January 2011

Sir,

One of NRI client have NRE deposits which were kept when he was a Non-Resident.The NRI client shifted to India to settle here. The status of NRI client was resident for the current year and NRE deposit matured in the current year. Whether exemption u/s 10(14) of Income tax Act,1961 will be available for the NRI client? Whether interest on the above deposit is taxable?

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7 Replies

Pankaj Arora (Learner) (3134 Points)
Replied 29 January 2011

Interest on NRE account is exempt u/s 10(14) for non-resident but in your case status of Assess is resident for current year than it will be taxable.

1 Like

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Juzer Sadikot (CA - innovative solutions for Imports and Exports) (1309 Points)
Replied 29 January 2011

Dear Gautham

Interest earned from NRE deposits account shall be exempted from tax u/s. 10(4)(ii) and exemption shall be available untill NRI/PIO becomes person resident in India (Section 2(v) of FEMA).

As per said section, when an NRI/PIO return to India for good, he needs to re-designate his non resident account to resident accounts i.e. NRE to either Resident Foreign Currency or Resident Saving Account, and so shall be considered as Resident for FEMA.

So, technically speaking, Interest earned from NRE Account shall be exempted irrespective of his Residential Status as per Income Tax.

Regards

Juzer

4 Like

CA PARAS BAFNA (Practising CA ) (33423 Points)
Replied 30 January 2011

Fantastic answer given by the expert Mr. Juzer.

Technically, NRE A/c has to be closed. Till its closure interest is exempt.

One more thing ....

NRI's Returning India after a long time say, 9 years or more enjoys status of Not Oridnarily Resident upto 2 more years of their return.

2 Like

chandru G (Ca- student) (34 Points)
Replied 25 June 2011

Thank You Dear All..,

Giving such usefull information.

CHANDRU G

DEO P TRIPATHI (MBA) (21 Points)
Replied 20 August 2015

Hello Masters

good discussions going on!!!

NRE interest is non taxable till NRI status continues well.

My question is

It is mandatory to show earned interest through NRE acct in exempt income while filing return by NRI?

Or not necessary?

Deo

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T N PILLAI (Others) (26 Points)
Replied 22 August 2015

I have been clarified by Bank, that returning NRIs have to declare their residency, within 6 months. And during this period all NRE accounts have to be changed to RFC or Resident local account. Tax will be collected at par with Residents.

FCNR and NRE deposits wil be changed to Resident on maturity. But Tax payable, from the date of becoming Resident.

Now wish to read some rules black and white.

Requires input from all learned

kartheek (student) (22 Points)
Replied 06 October 2015

one of my client has income from nre account as he is nri still now and under what section this income is except and whether full income is expect or part

thank you friends