Saturday, December 13, 2014

Does Interest on NRE Fixed Deposit is Taxable?

In short, No, interest earned on NRE fixed deposit is tax-free in India. If you are an India working abroad and earning in foreign currency, you have a couple of more investment options available than to a resident customer. If you keep your money or some part of your money in India, NRE fixed deposit is the best option for you.


Fixed deposits are most popular saving and investment method for millions of Indians from a long time. One reason of this is because it provides safety of principal amount and interest rates were very high compared to developed economy. You can easily gain 9% of quarterly compounded interest rate on an FD in India, but most of the Indian makes a mistake while thinking that FD provides the high-interest rate.

What they don't consider is taxation. Whatever interest you earn on fixed deposit is taxable in India, and that too with 20% if you don't submit your PAN card, otherwise FD interest will become part of your taxable income and clubbed together while deciding which income tax slab you are on.


NRE fixed deposit excel here because you don't need to pay any tax on interest earned. This is the single most reason I recommend NRI to put their money on NRE fixed deposit. If you add taxation 9% interest rate easily reduced to 6 to 7% depending upon your income tax slab, but if you don't have to pay any tax then what you see is what you get.  So to answer the question, Interest rates on NRE fixed deposit is not taxable. For those who are new to NRE deposit, let's learn more.



What is NRE Fixed Deposit

NRE or Non-Resident External deposit account is a fixed deposit account maintained by non-resident Indian (NRI) in Indian Rupees. You can open NRE fixed deposit online with both public sector and private banks. All major banks like ICICI, HDFC, Kotak, Axis bank, Citibank, DBS bank, YES bank,  State Bank of India and ING Vysya bank provides this facility.


The best thing about NRE fixed deposit is interest earned is tax-free. They are freely repatriable (money can be transferred without any restriction) also, so you if you want to buy property abroad, you can also transfer the money abroad without any hassle. You can open NRE fixed deposit with any bank but I recommend major players like Axis, HDFC, YES bank, ICICI and SBI. They are reliable, have good customer care and offers attractive interest rates.

You can open NRE fixed deposit account either by transferring money from your NRE savings account or you can directly remit to the bank for fixed deposit. Some bank even provides premium exchange rates to a customer who is opening NRE fixed deposits. 




NRE Fixed Deposit Interest Rates

Is NRE Fixed Deposit interest is Taxable in India
ING Vysya Bank is offering 9.25% per annum for NRE fixed deposit of period 366 days to 374 days for an amount less than 1 Cr. Development Credit bank (DCB) is also offering 9.25% per annum for 13 months to less than 24 months. YESBank is offering 9.10% for the period of 18 months 8 days to 18 months 18 days. On bigger banks, Axis bank is offering best NRE fixed deposit rate of 8.90% per annum for the duration of 18 months to less than 2 years. While HDFC is giving just 8.75$ for 1 year NRE Fixed deposit. On public sector banks, Vijaya bank, Canara Bank and IDBI bank are offering interest rate of 9.05% for period of 1 year, 500 days and 1 year, on the other hand biggest bank of India, State bank of India or SBI is just offering 8.50% per annum for NRE fixed deposit of 1 year to less than 2 year. Citibank gives worst rate, just 7.75% per year for NRE deposit of 365 days to 400 days. 



If you have any question with NRE fixed deposit then let me know. In my opinion, it's very attractive investment option, but you have to do your due diligence because not all FD are insured by RBI. Your FD is as safe as the bank where you have put the money. Interest rates keep changes, so for latest NRE fixed deposit rates please check respective bank's website. It also varies for different tenures. Invest money for longer duration if you don't need it otherwise invest it for short term with special interest rate to avoid penalty in case if you have to broke NRE FD before time, also known as premature withdrawal. Remember, currently no tax is levied on interest earned on NRE fixed deposit.

92 comments:

  1. Do you have to pay tax in US for the interest earned in these NRE account

    ReplyDelete
    Replies
    1. My understanding isthat under the US Tax Laws, the global inclome of the US tax-residents attracts US taxes. Same if the case with the US citizens too - they pay US taxes on their global income. If that be the case for the US-residnt NRIs too, then their NRE account income could be subject to US taxes. You may however like to check if there is a Double Taxation Avoidance Agreement (DTAA) between the US and India - in which case, there could be a case that the NRE FD interest may not be taxed in the US - since it stands subjected to the Indian tax laws (which happen to exempt it from Indian income tax!)

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  2. Some banks gives 11% of interest rate on Fixed deposit. I wonder why some people are okay with the banks which provide so less interest rates. Anyways, your information about NRE account are accurate and I've subscribed you for more information in the future.

    Regards,
    Apoorva
    HCBL Bank - Tathastu

    ReplyDelete
  3. I have opened NRE FD with a tenure of 2 years and 5 years 1 year back. now I am due to return to India for good. What should I do now? Should I break my NRE FD and take the money back? Do I need to pay tax on the interest earned for next 1 year and 4 years for these FD?

    Regards,
    Danush

    ReplyDelete
    Replies
    1. No, you don't need to pay any tax on those fixed deposit because NRE fixed deposits are tax free. you can keep the money as long as you like or as long as you need. Since you can only deposit foreign currency in NRE account, you cannot further deposit any money but anything which is already deposited still generate interest. Another thing to consider is that whether your NRE account will be valid when you are not NRI, I think you should check this with bank because I believe they do a KYC check every two year and need your passport/visa status to check whether you still NRI or not.

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  4. Do you need to pay tax on interest earned by NRE fixed deposit once you return back to India? I have opened two 5 years NRE fixed deposit, should I close them now or I can continue them till they mature?

    ReplyDelete
    Replies
    1. No, you can contine your NRE fixed deposits even after your return to India.

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  5. Javin,
    No kidding, I spent about 2 hours trying to look up details about NRE Fixed Deposits in India and another 30 minutes trying to reach a State Bank of India customer representative.
    Considering that I've been away from India for almost a decade now, do you have any suggestions as to the best banks in terms of customer service and response?

    ReplyDelete
    Replies
    1. I have been using HDFC for that purpose for few years and happy with their service so far.

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  6. Dear Sir, I am a NRI. I got a Resident savings account in SBI which i have opened while i was in India. Last year June 2014 I have remitted Rs. 1.5 Lakhs from abroad and made a Fixed Deposit of that Rs. 1.5 Lakhs in my savings account at the Interest rate of 5.5% per annum for which i got interest of Rs. 6987 and recently I came to know about Tax Deducted at Source (TDS), when I checked in my Sbi Acc income tax certificate for the financial year April 2014 - March 2015, bank deducted and paid interest of Rs.576.00 for the FD interest. I Don’t know what to do to get refund.
    Please help me in the below queries:
    1) What should I do now to get refund of that income tax paid by bank?
    2) As a NRI can I have Fixed Deposit in my Normal Savings Account?
    3) Can I Submit Form 15G to avoid Tax Deducted at Source for the financial year April 2015 - March 2016?
    4) Let say right now I have FD of Rs. 5 Lakhs at the Interest rate of 7.75% and FD interest income will be Rs.39890 for the financial year 2015-2016. I don’t have any income in India other than this FD interest income. May I still need to pay any income tax for FD interest income for next year? If so, then how much will be income tax?
    Thanks in advance for replying.

    ReplyDelete
  7. Hello Anonymous, Please see answers below :
    1) You need to file income tax return to get the refund, if you have not done already.
    2) As an NRI, you cannot have resident saving account. You should inform your Bank and they will convert it to NRO saving account. Regarding fixed deposit, its better you open another NRE account and do fixed deposit there because interest is tax free there and no TDS is deducted. Having said that, you can also open fixed deposit in NRO account, but there is no point doing it from abroad income, NRE is better choice. If you are getting some rental income then use that money to do FD in NRO account.
    3) Yes, you can submit Form 15G, check with your tax consultant though.
    4) You don't need to pay tax in India if you total income is less than 2.5 lakh, the latest exemption limit which is applicable to the financial year 2015-1016, but bank will deduct TDS if you don't submit form 15G.

    Thankss

    ReplyDelete
    Replies
    1. This article is misleading and incorrect. The reason NRE and FCNR are not taxed in India is because these are for NRIs. NRIs global income gets taxed in their respective country eg: USA, UK etc. Therefore you need to obtain the interest certificate and pay applicable tax in your resident country for the period.
      Therefore it isnt very popular instrument of choice.

      Taxfree bonds are better because they are inherently tax free for all NRIs and Residents of India therefore these behave in the same fashion as PPF and are Exempt from taxed for all.

      You need to pay about 30-45% tax on these NRE and FCNR interest bringing your interest income down by half while tax free bonds provide interest of 6-8.7% on a yearly basis and for tenures upto 20 years which you can buy / sell anytime in the secondary market (stock market). they are very low risk and independent of the stock market movements.

      Regards,
      Varun
      varunbadhwar2012@gmail.com
      BE, MBA (Finance)

      PS: One advise to the author, kindly write articles in completeness else mention disclaimers so that viewers know this information is not complete and they should seek proper financial advise.

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    2. Hello Varun,
      This article talks about whether interest earned on NRE fixed deposit is taxable on India or not, whether they are taxable is entirely depends upon the tax laws of the foreign country where NRI is residing e.g. there are countries which doesn't tax you on your global income.

      The disclaimer is there, I am not a financial expert, I just post my learning and personal experience.

      Regarding completeness, it's complete on it's purpose i.e. whether interest earned on NRI is taxable in India or not. The 30-45% tax you put on NRE and FCNR interest is also depends upon country of residence.

      Btw, your comment does provide value and and thanks for that.

      Delete
  8. Dear Mr.Javin Paul, Thanks for your response on my queries.
    I have one more doubt, even for NRO savings account too if the interest income from FD is less than 2.5lakhs then i don't need to pay any tax right? and for NRO savings I can submit Form 15G to avoid TDS deduction by bank isn't?
    Yes, as you said I can Open a FD in My NRE account but the problem is Minimum tenor period for NRE FD is 1 year, so in an emergency situation if I cancel my FD on the 11th month then there will be no Interest paid for that 11months. But in resident or NRO savings FD minimum tenor is 7days and so on, so I prefer FD in this.
    Thanks

    ReplyDelete
    Replies
    1. @Anonymous, You are right, if you break NRE FD before maturity, you won't get anything, but interest is deducted at rate 30% in NRO FD, so yes unless you submit form 15G, its not a good option, but if you don then its great.

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  9. I have been remitting money in my wife account since i had not opened NRE A/c. Is there a limit on remitting money to India in my wife ac ? She has invested that money in local FD in children names and some in her name. Is the investment taxable ? Should I stop sending money in her a/c and open NRE a/c.as a better solution.

    ReplyDelete
    Replies
    1. It's Ok to send money in your wife's NRE account and that Investment is not taxable, but you should also open an NRE account for yourself.

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    2. I have remitting in my wife local saving a/c. Is the amount taxable ? Is there any limit on remittances in her account.

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    3. If you are transferring in her local saving account, which I believe is a resident saving account then the amount is not taxable because you have already paid tax for that in the country you are earning. Regarding FD, interest earned on that is taxable but only if your wife's total income is more than exemption limit i.e. 2.5 lakh. Regarding transfer, I don't think there is a limit, of course if you are not transferring huge amounts.

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  10. Sir, Any amount we put in FD , that all interest is tax free ? if I come back India , do I have to pay tax on my FD ?

    ReplyDelete
    Replies
    1. Hello JAX, If you invest in NRE FD then Yes, you don't need to pay any taxes. Even if you come India, the NRE FD can continue until they matured.

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  11. Hello Sir, Is there an upper limit on the amount of NRE FD? i.e. can I even make an NRE FD of 40Lakhs or 80 lakhs as well? or can I make multiple FDs of 10lakhs each? And is there an upper limit on the years? like can I make an NRE FD for 15 years or higher as well? From your article and comments above, I can understand that once the FD matures, the whole money is tax free, so If I make an NRE FD now for 15 years and return back in a month, I still have a NRE FD which is valid for 15years tax free with good returns.
    Thanks!

    ReplyDelete
    Replies
    1. @Anonymous, I don't think any upper limit on NRE FD but yes interest rate is different for NRE fixed deposit of more than 1 crore INR. Regarding opening an NRE FD with 80 lakhs over 4 NRE FD of 20 lakhs, I think second option is better because if you need money down the line than you can break any one FD and rest will earn you interest but if you have just one then whole 80 lakh will not earn any interest. Remember, if you break NRE FD before one year, no interest is paid.

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  12. Hello Javin,

    If I have opened NRE FD using net banking for my NRE account, do I still need to submit form to get TDS waiver or it is not required for NRE account?

    Thanks,
    Manish

    ReplyDelete
    Replies
    1. Hi, no TDS will be deducted for NRE FD because interest earned on NRE fixed deposit is tax free in India. Nothing is required if NRE FD is opened from NRE saving account.

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  13. Hello,question is if i earn more than 2.5 lacs interest on NRE FD on yearly basis,shall it be taxable if yes how much?thank u

    ReplyDelete
    Replies
    1. Hello Anonymous, even if you earn more than 2.5 lacs interest on NRE FD on yearly basis, it's not taxable because interested earned by NRE FD is not added into your taxable income.

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  14. Hi - I moved outside India in June 2015 and did not immediately convert my resident savings account to NRO account (did not open any NRE account as well). I transferred money over the last 6 months to my Resident Savings Account (all of which was earned abroad) and made some FDs. Now, I am thinking of converting my Resident Savings Account to NRO account and also to open an NRE account simultaneously for future remittance. Is there any way to save tax on FD interest income (income source is outside India on which tax has been paid in the country of earning).. Thanks

    ReplyDelete
    Replies
    1. You can try with DTAA (Double Tax Avoidance Agreement), if interest is already deducted as TDS from your fixed deposit.

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  15. Hi, firstly thanks for a great blog whoever put this up!

    I am an NRI in london and my father over the years had made NRE FDs in my name, it is about 40-50lakh in rupees 10 /15 amounts of FDs. He has also made few Deposit in GBP £20k FCNR. I have a NRE account in india.

    At the moment i think i dont pay any tax on the interest earned. But i have heard about something called FATCA or CRS UK?? Which i am not understanding.

    Can i not pay the tax in india even though i have NRE account. It is quite old and it keeps on renewing so thats how i have got 40-50lakh.

    If i pay the tax in india, would i have go pay the tax in london? What are my best options to minimise this and if oneday i want to bring the money back to london uk??

    Thanks for the advice.

    ReplyDelete
    Replies
    1. @Anonymous, If you don't have any income other than interest earned on NRE fixed deposits than you don't need to pay any tax in India, because interest earned on NRE FD are tax free in India.

      Now, coming back to UK, I assume you are a tax resident in UK, so whenever you want to bring the money back to UK, if I am not wrong it would be considered for tax and you need to pay tax as per UK laws.

      Regarding FATCA and CRS, I guess UK has signed agreements with tax heavens like Bermuda and Cayman Islands to automatic report tax information for UK residents, I don't think India is on that list yet for UK but it has signed FATCA IGA and CRS for USA last year.

      In short, FATCA (Foreign Account Tax Compliance Act) has been the the United States
      of America’s (U.S) answer to tax evasion by U.S. taxpayers through use of offshore
      accounts to park money otherwise taxable in the U.S and UK are now following the same path.

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  16. INTERST ON DEPOSIT IN INDIA ON NRE ACCOUNT IS TAX FREE, WHETHER DEPOSIT IS IN BANK OR OTHERWISE TO FRIENDS AND RELATIVES,
    INCOME GENERATED ON DEPOSIT CAN BE GIFTED TO NEAR RELATIVES AND PRINCIPAL REPAT BACK, WILL IT BE ILLEGAL.

    ReplyDelete
    Replies
    1. @Anonymous, It's your money so nothing illegal about it. Unless the amount you want to gift is huge, shouldn't be a problem. Though receiver may need to pay tax

      P.S. - Please avoid using all caps as it considered shouting on Internet.

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  17. Javin - thanks very much for your advice. I have a couple of questions :
    a) I have just opened a NRE account. I realise that the bank has not updated my PAN number. If I open a FD from the NRE account, will the interest be taxed given that I have not updated the PAN number? How important is it to update the PAN number immediately?
    b) Do I need to show the interest from the NRE and NRO accounts in my tax filings in India?

    ReplyDelete
    Replies
    1. hi, if you opening an NRE FD from your NRE saving account then go ahead, PAN will not be issue there given it's completely tax free including interest in India.

      You can also open NRO Fixed deposit from NRO account without updating PAN number in case you want to lock interest rate but update your PAN sooner than later. Unlike Resident fixed deposit which has lower TDS rate if PAN is updated, NRO FDs always charge TDS @ 30.9%.

      b) No, you don't need to show interest earned from NRE account because it's not taxable but yes you need to show interest earned from NRO account while filling tax returns.

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    2. Thanks Javin. Appreciate your responding.

      Delete
  18. Hi Javin,
    Thanks for your blog. It is informative. I have following question,
    Q1. As per India TAX laws, I am NRI for last year & this year. So I opened NRE account 2 days back and also converted a resident savings account to NRO. Should I break all FD linked to NRO account now as I do not have to pay taxes upto INR2,50,000?

    Q2 : Lets assume during April-2016 to march-2017 , I stay in India for more than 183 days, does my NRI status then go away and I have to close my NRE account immediately?

    ReplyDelete
    Replies
    1. Hello @anky_10, Thank you. NRIs still need to pay taxes on income earned or accrued in India. I am assuming all your resident fixed deposit will get converted to NRO fixed deposit and interest earned on NRO FD are taxed @ 30.9% via TDS, but you can do tax claim by filling income tax returns as your total income earned is less than 2.5 laks.

      Ans 2. Yes, if you stay more than 182 days in India in a given financial year, your status would be resident and your global income will be taxed as per Indian tax rate. As much I know NRE fixed deposits will be active until the get matured but yes, you need to change your NRO account to resident and close your NRE saving account or FCNR deposits. You can also my post what happens to NRE, NRO or FCNR account when NRI returns back to India to learn more. Cheers

      Delete
  19. Dear Javin,
    Your replies are very educative and to the point thank you.
    1) I am an NRI since almost 10 yrs now, i have not converted my old saving accounts to NRO account, is that an offence? What is the penalty if yes? I hardly have any money in those accounts and hardly any transactions.
    2) I dont have any taxable income in India as all my investments are tax free in India, do i need to file returns or do you recommend i should file returns?

    thank you in anticipation

    ReplyDelete
    Replies
    1. @Anonymous, you should convert your old saving account to NRO account as its mandatory according to FEMA, I would say better close those accounts and open NRE accounts.

      If you don't have any taxable income then no need to file income tax but you should remember that basic exemption limit of 2.5 lakh INR is before tax saving.

      NRE FD interest rates and long term capital gains are not taxable anyway.

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  20. hello! I am an NRI and have an NRE account with HDFC and have several FDs there. I understand the interest accrued annually is exempt from taxes in India. My question is this: supposing in 2014 I had an FD of 100000Rs that matured in 2015 to 110000 RS and I reinvest the entire amount for another year to mature in 2016. do I pay tax in the US on the 10000Rs I earned as interest for the year 2015? or do I pay tax only when I use that money for some purpose?

    ReplyDelete
    Replies
    1. You need to pay tax when you show that money in your tax filling in USA. Ideally, you should show the 10000 INR interest earned as your income in the same year in USA and pay tax.

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    2. May i know what is exact rate % that we need to pay as taxes in USA for the interest earned in India?

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    3. Hello @Sankar, the interest earned on NRE FD is clubbed with your other income in USA and that based upon your tax bracket you need to pay taxes.

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  21. Can someone please clarify if interest earned on NRE accounts is taxable in US? Does double tax agreement apply here?

    ReplyDelete
    Replies
    1. @Sankar, Yes, interest earned on NRE accounts is taxable in US. There is no need of double tax agreement here, because it's tax free in India. DTAA comes into picture when you need to pay tax on same amount in two countries.

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  22. Hello,
    Really thanks for the information on NRE/NRO accounts. I have specific question: what is the upper limit for a fixed deposit in NRE Account. Besides this, if I am putting say $10K in the NRE account, then can I use the interest earned with this $10K fixed deposit in India (tax free) and convert $10K back to USA. If I am doing so, do I need to pay any tax for the $10K which was tax paid in USA already.
    Thanks lot!!

    ReplyDelete
    Replies
    1. @Anonymous, just remember that interest earned on NRE FD is tax free in India but not in USA. If you want to repatriate both principle and interest, which you can than you only need to pay taxes on interest earned, not on the principle, because that is not the income.

      Delete


    2. 1. What about the EU countries like, Italy, Switzerland or Germany, do I have to pay tax of the interest earned of the NRE account?

      2. One other thing, as of today, which bank gives the highest interest rate on the savings of NRE account, is it YES bank? I saw they give 7%, but is is it a FD or normal savings NRE account interest rate?

      Many thanks for the detailed discussion and reply,

      Anirban.

      Delete
  23. Hello - I have an NRE Account with HDFC bank as well as CITI Bank. I live in USA and am a US Citizen. At the end of the year, Citibank produces 1099-INT statement and sends it to me, but HDFC bank doesn't (probably because HDFC is not an American bank). My question is - I do have to pay taxes on the money I earned in interest on NRE account and fixed deposit accounts with Citi bank as they issue 1099-INT form. However, when I contacted HDFC bank, they stated that NRE account and Fixed Deposit accounts are interest free and I don't need to pay any taxes on those. I understand that they are tax free in India; however, do I still need to pay taxes on it in USA?

    ReplyDelete
    Replies
    1. Yes, you need to pay taxes on interest earned on NRE fixed deposit in USA. CITI is right on doing that.

      Delete
  24. Hello, I have 2 different type of investments - 1 NRE FD and 1 Rupee Plus Plan (a foreign currency FD and a linked forward rate). If the tenure is for 5 years, and I am returning back to India after 2.5 years,
    1. Will I have to pay tax on the interest income?
    2. How will it be calculated for both the instruments?
    3. Will I have to pay the tax only on Maturity of the instrument or do I need to calculate the interest accrued to the account every year and file taxes for the same?

    ReplyDelete
    Replies
    1. Hello @get_amazed,

      It depends upon whether you have opened NRE FD and Rupee Plus Plan to payout interest on monthly or quarterly basis. If yes, then you need to pay tax because that will be considered as your income once you return to India.

      When you return back to India, you can keep the NRE FD going and in that case, you don't need to pay tax on maturity amount because interest earned is tax free.

      Delete
  25. Hello sir,If I start NRE FD of 1 yr the interest will automatically add to existing amount every yr.Then the interest earned on that interest is taxable or not

    ReplyDelete
    Replies
    1. No, interest earned on NRE fixed deposit is completely tax free in India, but you need to pay tax on USA if you are a US tax resident.

      Delete
  26. Hello,

    If I convert the Saving account to NRO. can i repatriate that money from india to US and then can I transfer that money to NRE account?

    ReplyDelete
  27. @12, Yes, you can repatriate money from NRO account subject to 1 million USD per financial year limit. You also need to pay tax and take approval before sending money from NRO to NRE account or your overseas bank account, but it's possible.

    ReplyDelete
  28. Dears,
    10 years back i was working abroad, having some nre fd which is going to renew very soon. now i am retired & back to india hence bank asked me to close nre account last years. now bank told me they will deducted 33% from my nre fd & put it in open account. how can bank apply interest on nre fd ? any views from yourside ?

    ReplyDelete
  29. A Citi Bank Globe Ac in Singapore was closed and amt repatriated to India in Feb 2015. I opened it when I was an NRI more than ten years ago. Returned in 2005. What are the tax implications?

    Thanks in advance.

    ReplyDelete
  30. Hi I will be returning to India in August 2016, I am A NewZealand citizen having an OCI. I have opened an NRI account from NZ in India at Bank Of Baroda and I have been regularly transferring money into his account, it's a saving account.
    Since I intend returning to India for good, can I put this money in a NRI fixed deposit when I get back, is it possible?

    ReplyDelete
    Replies
    1. @Dennis, ofcouse you can put that money on NRI fixed deposit, better put on NRE fixed deposit as interest earned on that account is tax free. You can even do it now from sitting in NewZealand by using Bank of Barod's online NRI netbanking services.

      Delete
  31. Hello,

    I understand that interest earned on NRE accounts is tax free in India. However if the interest earned amount exceeds 2.5 Lakh INR in a financial year, do you still have to file taxes in India even though its considered tax free?

    ReplyDelete
  32. I am an NRI living in Malaysia, Is NRE Fixed Deposit interest taxed in Malaysia ?

    ReplyDelete
  33. Hi I am an NRI living in Malaysia, is NRE fixed deposit interest taxed in Malaysia?

    ReplyDelete
    Replies
    1. Helllo K, I am not sure about Malaysia tax laws but I believe they will be added to your income when you repatriate the money to Malaysia. It's worth checking if overseas income is taxed on Malaysia or not.

      Delete
  34. Hi, I was an Indian and now I am a US citizen that is in India right now due to health reasons, I came to India last year and since I dint have a back account here I transferred all my money to my moms account who is an Indian passport holder, now I am better and want to have my own account and stuff in India, so the question is what is the account that I should have a NRO or a NRE? I want to keep this money in FD"S for right now, so can my money go from NRO to NRE so that I dont pay interest on the income earned from FD's? IS it possible to do that, if yes then what is the best bank that could get this done? If it is not possible then should I get an normal savings account with my PAN card or is it still better to have a NRO account? The income earned on these fixed deposits is the only income that I have right now since I am sick due to a brain injury, dont know when I could go back to work or the US so I want to pay the least amount of tax possible on the interest earned from this money.
    Please help as I am very confused as to what to do and everyone here has there own theory rather than facts!
    The amount is 90 lakhs only and my mom would right me a check.
    Thank you

    ReplyDelete
  35. Hi Javin, I am a British Citizen holding an OCI card. I have opened an NRE savings account in India recently (without a PAN card number as I don't have one and never have, instead I completed a form 60). I plan to open a fixed deposit online from my NRE savings account soon and it always requests me to update my Pan number (for amounts over 50,000 rupees). My question is do I just ignore this and proceed to open the fixed deposit online from my NRE savings account and NO tax (TDS) will be deducted in the future?

    ReplyDelete
  36. Hi, I get interest on NRE FD but I am using exact same amount to pay for my Home loan in India. Do I need to first pay tax on 'earned interest' in my country of residence ? Or is it fine the way I have worked out the model ?

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  37. I am not sure whether the information provided here about taxation on NRE FD is totally correct. I faced a different situation while settling back in India. I had kept all my earnings in NRE FD's with a tenure of 2 years at the time of arrival in India. Once my stay in India crossed 182 days and I approached my bank for re-designation of NRE accounts to domestic status. The bank's advice was to retain those FD's without breaking until maturity to gain maximum interest and tax benefits. They said it is legal to continue the NRE accounts upto 2 years.

    The interesting part is that many of the Chartered accountants and tax officials are fully aware on NRE taxation rules in India and I keep hearing contradictory statements. The banks are not liable to charge TDS on NRE FD's and the interest received will not appear in Tax Credit statements (Form 26AS). Couple of my CA friends informed me that since there is no tax on the interest received from NRE FD's, it is not required to show this income in tax filings. Another CA told me that there is no need to pay tax on the interest until maturity of those FD's. I came to know from another CA that IT rules are different, and tax has to be paid on interest received from NRE FD's from the day when your status changed to resident. He added that Income tax department will receive all such information from the banks and they could question you about such income anytime later. However, when I received the final settlement at the time of conversion of NRE to domestic accounts, I declared the total interest income received from NRE FD's from the date I became a resident and paid the tax according to the tax slab.

    Now, I think my friend was right about the tax rules. Recently I received a notice from IT department to give details about interest income omitted or not declared. Though I had paid the taxes, I am still not convinced whether the interest received from NRE FD was taxable or not. This remains a grey area for me.

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  38. i have been under NRI status for 6 years now, i havent opened NRE or NRO account as yet, my all earnings are in my Saving account in India. which i opened while i was working in india. I also have FDs in my saving accounts in India. Now i want to open an NRE account and transfer all amount i have in savings to NRE, how is it possible and let me know the way outs to come out of this..

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  39. hi,
    i fixed rs 10 lakhs in Punjab national bank for 2 years but asked to credit the interest on monthly basis. do i have to pay the tax?

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  40. hi i have fixed 10 lakhs in Punjab national bank for a tenure of 2 years and asked the banker to credit the interest on monthly basis. do i have to pay the tax?

    ReplyDelete
  41. Dear Sir ,
    NRI FD looks lucrative option.

    Let us consider a scenario, Person X lives in Country ABC. X invests in india and reaps the benifit of about 9% interest on this FD. The interest is tax free in Inida. Does this person needs to declare this Interest amount in the country he lives in (Country ABC)? The country ABC demands world wide declaration of income, which also include the interest earned.
    What should the person X do ?
    Thanks
    Regards
    X

    ReplyDelete
    Replies
    1. Hello @Hrishikesh,

      It depends upon the income tax law of that country. For example, US citizen has to pay their taxes on global income, so they have to pay taxes on interest earned on NRE and FCNR fixed deposit and they has to declare that in their income tax returns to IRS, you might have heard about FATCA compliance (Foreign Account Tax compliance Act).

      But, there are countries where you don't need to pay taxes on foreign income. So it entirely depends upon the country you are living and their tax laws. The right way is to consult a certified tax consultant on that country.

      Delete
    2. Thank you very much for your answer. I appreciate it. the answer was helpful.

      Delete
  42. Hi, I am a NRI for the last 3 years. I have about 10 lakh Fixed deposit in India and a regular resident bank account. Bank automatically deducts tax from that. Should I convert myaccount to NRE/NRO account. Actually, I don't know much about that. Any suggestions?

    ReplyDelete
    Replies
    1. Hello @Anonnymous, you should open an NRE account and remit money on that, it's good for tax purpose and you should convert your resident saving account to NRO account, it is required by law.

      Delete
  43. I am NRI and I am earning interest from my NRE Fixed deposit which is more than 2.5 lakh in a financial year. Do I need to file tax return ?

    ReplyDelete
    Replies
    1. Hello @Anonymous, interest earned on NRE fixed deposit is not taxable even if they are more than 2.5 lakh. You don't need to file income tax return if that's your only income.

      Delete
  44. Hi, I am an NRI and have NRE Fixed deposits. I also file Income tax return in India for my earnings of NRO account. Do I need to show the interest on NRE FD in my IT returns in India?

    ReplyDelete
  45. Hi, I am NRI and have invested in NRE fixed deposit. I also file income tax return in India for my earnings in NRO account. My question is: am I required to show the interest on NRE FD in my Income tax return in India?

    ReplyDelete
    Replies
    1. Hello Ansatlav, No, interest earned on NRE fixed deposit is not considered as taxable income and you don't need to show them in your income tax return.

      Delete
  46. Interest earned on deposits is tax free for NRE accounts. But what if i get my salary credited to my NRE account? Is the deposit taxable?

    ReplyDelete
    Replies
    1. No, deposit will not be taxable but you need to pay tax on the country where you are earning.

      Delete
  47. Is salary deposited in NRE account taxable? Can I give my NRE account for salary deposit which I am earning aborad?

    ReplyDelete
    Replies
    1. Hello Krishna,
      Yes, you can if your company accept it. Generally many company credit salary on local bank account with local currency but anyway, they will not be taxable in India, but you need to pay tax in the country where you are living, doesn't matter if you get salary credited in NRE account or local bank account.

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    2. Thanks Javin. I work for an US based international NGO and based in Nepal. So I get my salary from US in dollars and credited to resident account in India. This has significant tax implications. So I wanted to understand if I get my salary credited to NRE account in India, then can I save tax on the deposit/salary? I know that interest earned in tax exempted. But confused about the deposit/salary. Is it also tax exempt? Thanks for your support.
      Krishna

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    3. Hello Krishna, Since you are working for US based International NGO and working in Nepal, it's really complicated. I think since you are earning from US employer, you are liable to federal tax in USA. But, since you are not earning in India, salary credited to NRE account will not attract tax for sure. I suggest you speak to your company HR about your taxation in the USA.

      Delete
  48. Thanks Javin. Very helpful.
    Krishna

    ReplyDelete
  49. Hello. I live in uk and do not have any income as my husband works. I have nro account and in case I start fixed deposits in my nro account, I will be taxed. But can I claim tax when I file my tax return in India? Also where do you get 15 G form? Do I need to give it to bank.

    ReplyDelete
    Replies
    1. Hello @Unknown, if interest from fixed deposit is your only income and it doesn't cross the threshold e.g. 2.5 lakh for man and around 2.8 to 3 lakh for woman then you can file income tax return and always claim the money deducted as TDS.

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