What happens to NRE Saving Accounts and Fixed Deposits after returning to India?

Many Indians who goes to work abroad for work opens NRE saving and NRE fixed deposit account to take benefit of higher interest rate and absolutely no tax on interest earned on those account, but do you know what happens to your NRE account after you return to India? If you are only coming to India for short term, you can still keep your NRE account but if you are coming India to take employment or for opening business you need to inform your bank about change in your NRI status and they will convert your NRE saving account into Resident account. In case of NRE fixed deposits, you will continue to earn interest at original rate until maturity or pre-closure, once tenure is over you will get the money. This will be tax free as there is no tax on NRE fixed deposits in India.


There are many types of NRE accounts e.g. NRE (Non resident External) on which you can only deposit foreign currency, NRO (Non resident Ordinary) on which you can also deposit India currency, FCNR(Foreign Currency Non Resident) and their handling is also different. 

For example if an NRI invest in a 10 year NRE fixed deposit and return to India after 5 years then also its NRE fixed deposit will continue and earn interest till 10 years. After 10 years you will get DD of the final amount and you don't need to pay tax on maturity amount because interest earned is tax free in NRE fixed deposit.

What happens to NRE account after returning to India?

In short, your NRE account status after returning to India will be changed to resident account
FCNR deposit will continue to be held until maturity and NRE fixed deposit can also continue till maturity. Since interest earned on NRE account is tax free you don't need to pay tax on that amount. 

So don't consider breaking your NRE FDs until you really need money. After maturity, since you become a Resident Indian your earning will be taxable accordingly.

Who can open RFC account ?
Ans.: A returning NRI who was resident outside India earlier and are returning now for permanent stay are permitted to open RFC account.

What are the benefits of RFC accounts ?
Ans.: The benefits of RFC accounts are: In case of conversion from FCNR(B) accounts there is no exchange loss.

Balance in RFC account can be used for local payments and can be remitted abroad for all bonafide purposes.

In case the NRI was residing abroad continuously for a period of 9 years out of previous 10 years, then there will be no tax on interest earned on RFC accounts for next 2 years. In the event of the returning Indian regaining NRI status, the balances in RFC account can be reconverted into NRE /FCNR(B) deposits.

Other NRI  Articles You may like to read

• Is it mandatory to file income tax returns for NRIs?
• 3 Income tax benefits of opening NRI accounts in India
• How to determine the tax residential status of NRIs?
• 10 Income tax deductions and exemptions NRIs should know
• How NRIs can file their income tax returns online
• 13 ways to save income tax in India
• 5 Tax Saving options not available to NRIs
• Is NRI's overseas income taxable in India
• How much TDS is deducted from the NRO account?
• How much is the minimum account balance in the NRI account?
• Is it mandatory for NRIs to declare foreign bank accounts on tax returns?
• 10 points NRIs should know about Income tax?
• Is Aadhaar card Mandatory for filing an Income tax return for NRIs?

Thanks for reading this article so far, if you find this information useful then please share it with your friends and colleagues. If you have any questions or feedback then please drop a note.