Home |Tax returns filing | I am a non-resident Indian (NRI) and have not been in India for more than 730 days in the preceding seven years. I would become a resident in India soon and would like to know whether the interest on non-resident external (NRE) deposits already placed with banks in India and also, please advise if tax is exempted, and how long can I get exemption on such interest income?

I am a non-resident Indian (NRI) and have not been in India for more than 730 days in the preceding seven years. I would become a resident in India soon and would like to know whether the interest on non-resident external (NRE) deposits already placed with banks in India and also, please advise if tax is exempted, and how long can I get exemption on such interest income?

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Padmaja Padmaja
Answered on February 05,2020

Assuming that you have been living outside India and your residential status is that of an NRI as per the Income-tax Act, the interest earned from NRE deposits shall be exempt for you. However, when you return to India for good and intend to stay here for an indefinite period, you must immediately intimate your bank so that they can re-designate your deposit account from a non-resident to resident account. This is as per the Reserve Bank of India (RBI) regulations. Once these accounts have been re-designated, interest earned on the deposits shall be taxable in your hands, even though your status as per the Income-tax Act may be non-resident or resident but not ordinarily resident. Therefore, immediately upon your return to India, such deposits shall be re-designated to resident deposits and interest earned from them shall become taxable for you.

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