Many NRIs returning to India are unsure how long they can maintain their NRE accounts and whether the interest earned remains tax-free after their return. Today's Ask Wallet Wise query decodes what tax rules say.
Moneycontrol's Ask Wallet Wise initiative offers expert advice on matters of personal finance and money. You can email your queries to askwalletwise@nw18.com, and we will try and get a top financial expert to address your queries.
I am an NRI but will be returning to India for good by the end of the year. For how long can I maintain my NRE account, and what will be the income tax treatment on the interest earned through it?
Expert Advice: Interest earned on an NRE account is fully tax-free in the hands of an individual who is a non-resident under the Foreign Exchange Management Act (FEMA). One can continue to hold an NRE account as long as they qualify as a non-resident under FEMA, but not beyond that.
A person becomes a resident under FEMA once they return to India for employment, to start a business or profession, or with the intention of staying in India for an indefinite period.
Since you plan to return to India permanently, you will be considered a resident from the day you arrive, regardless of your physical stay duration. Upon your return, you should inform your bank about the change in your residential status. The bank will then redesignate your existing NRE account as a regular resident account.
This change will also help with accurate tax reporting, as interest earned on the account after your return will be taxable in India.
Disclaimer: The views expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
