Status of NRE FD
Sir I was non-resident for AY 2015-16. Now i have returned back to india and settled so for AY 2016-17 my status is Resident but not ordinary resident. I have substantial amount of my savings invested in FD's which were classified as NRE FD's upon original investment. I was told by one of my CA friends that the status of the deposits does not change even if you have returned to India, as the classification as "NRE Deposits" by bank is not as per Income tax act, but governed by FCRA Act anf FEMA Act. Therefrore these investments will continue status of NRE Deposits.
Please confirm my understanding
Asked 2 years ago in Income Tax from Trivandrum, Kerala
Any interest earned on the deposit in an NRE account is exempt under section 10(4)(ii) for an individual who is a ‘person resident outside India’ as per the Foreign Exchange Management Act,1999, (Fema) or who is a person permitted by the Reserve Bank of India to maintain the aforesaid account. A person returning to India permanently becomes a ‘person resident in India’ under Fema. On becoming a ‘person resident in India’ under this Act, the onus is on the individual to notify the bank of the change in status from being a ‘person resident outside India’ to ‘person resident in India’ so that NRE accounts are re-designated as resident accounts or the funds may be transferred to the Resident Foreign Currency (RFC) accounts (if the individual is eligible for this). Though the interest earned on a resident account is taxable in India, interest earned on deposits in an RFC account is exempt under section 10(15)(iv)(fa) till the period the individual is an RONR. You may check with your bank if you can open an RFC account and transfer your FDs in the NRE accounts to it to claim such exemption.
Please feel free to revert/call in case of any doubts
Thanks and Regards
CA Abhishek Dugar
Talk to Abhishek Dugar
5.0 on 5.0
Yes its true. But after a certain period it can be changed.
Talk to Shyam Sunder Modani
5.0 on 5.0
Till the time your status is RNOR, you can benefit out of it.
Trust this clarifies your query.
Feel free to call back/ get back in case of further clarifications.
Rohit R Sharma
BCOM, ACA, LLB-GEN, CERT. FAFP.
Talk to Rohit R Sharma
5.0 on 5.0