OCI - Indefinite stay planned in India

OCI - Indefinite stay planned in India - NRE FD status

Good Morning,

I am a UK citizen with an OCI card. I have now been in India for 4 months and will probably need to be here for an indefinite period of time (definitely more than 2 years). Grateful if you could let me know if:

(1)  I should now convert my NRE Fixed Deposits into resident deposits (and if this will mean that I will have to close the NRE FD to open a resident deposit) or if they can be held as NRE accounts until maturity 

(2) If I qualify for the RNOR status (given I have been out of India for more than 10 years) and what the associated tax implications/exemptions are and

(3) Monies in a joint NRE deposit account (with my wife) can be transferred into my wife's sole account

Thanks,
Ray

Asked 7 years ago in Income Tax

You must inform your bank about change in your residential status.

NRO Account/deposit must be re-designated as resident rupee account (savings account or fixed deposit).

NRE savings account will be re-designated as a resident rupee account.

FCNR and NRE deposits can be closed immediately or can be allowed to run up to maturity.

If you choose to continue till maturity, you will get the contracted rate of interest till maturity. Premature withdrawals/closure will attract penalty as per terms of the deposit.

For FCNR deposits and NRE account/deposit, you also have an option to transfer the balance to a Resident Foreign Currency Account (RFC). No penalty is payable for premature withdrawal of NRE/FCNR accounts in such cases.

The monies can be transferred to Wife account.

Shyam Sunder Modani

CA, Hyderabad

1408 Answers

164 Consultations

5.0 on 5.0

Talk to Shyam Sunder Modani

(1) Only a Non-resident can hold NRO or NRE Deposits. Once you stay in India for a particular Financial Year for 182 days or more, you are a resident for the Purpose of Income Tax. So, you have to inform the Bank about the change in Residential Status and get the NRE FD converted into either normal Resident FDs or to Resident Foreign Currency (RFC) Deposits.

(2) Since you have stayed out of India for more than 10 years, you are a RNOR for Current FY and will continue to be a RNOR till the time you breach one of the 2 conditions - Stay in India for 729 days or more in the last 7 FY or not be a Non-Resident in 9 out previous 10 years. Interest paid by any Scheduled Bank in India to a RNOR will be tax free provided the deposit is in Foreign Currency. So, better convert the NRE FD into RFC Deposit to enjoy tax free interest for at least one more year.

(3) Yes. You can transfer the money into wife's individual Bank Account

Pradeep Bhat

CA, Bengaluru

542 Answers

94 Consultations

5.0 on 5.0

Talk to Pradeep Bhat

Dear Sir,

a) You can still held it as NRE FD till maturity without giving any effect

b) Income earned in India becomes taxable and you need to pay tax on the said amount.

c) Yes you can always transfer that subject to your wife hold NRI status and account used is NRE Account. if it is NRO Account than you can transfer but you might not able to get it back.