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Business News/ Money / Calculators/  Interest on NRE or FCNR accounts exempt from tax

Interest on NRE or FCNR accounts exempt from tax

Interest earned on these deposits by persons resident outside India as per FEMA is exempt from taxes


Are any tax concessions available to non-resident Indians (NRIs) on balances or deposits held in non-resident external (NRE) rupee or foreign currency non-resident (FCNR) accounts?

—Sandip Roy

Interest earned from deposits in an NRE account by persons resident outside India as per the Foreign Exchange Management Act, 1999, is exempt from taxes in India. Similarly, interest income earned from deposits maintained in FCNR account is exempt from tax up to such period the NRI continues to be a non-resident or a resident but not ordinarily resident (RNOR) in India for income-tax purposes. A person is said to be a non-resident of India in case she has spent less than 182 days during the fiscal year; or has spent less than 365 days in India during the four preceding years and is in India for a period of less than 60 days during the year. Further, a person qualifies to be a RNOR, if she is a resident for the relevant year and is a non-resident in India in nine out of 10 previous years or has during the seven previous years been in India for 729 days or less.

After returning to India, for how long can I enjoy tax-free interest on my FCNR deposits?

—J. Shukla

Interest income earned from deposits maintained in an FCNR account is exempt from tax up to such period you are a non-resident or RNOR in India.

Do I need an income tax clearance certificate if I am going abroad for a project for a year-and-a-half?

—Nayan Karnik

I am presuming that you are a person domiciled in India. On your departure from India, you will have to furnish to the tax authorities in Form 30C the details pertaining to your Permanent Account Number, purpose of your visit outside India and the estimated period of your stay abroad. It is not mandatory to obtain a tax clearance certificate.

However, in certain circumstances, a person may be required to obtain a tax clearance certificate from the income-tax authorities, say, where a person is involved in serious financial irregularities and his presence is necessary in investigation of cases under the Income-tax Act or the Wealth-Tax Act and it is likely that tax demand will be raised against him, or where such person has direct tax arrears exceeding 10 lakh outstanding against him that have not been stayed by any authority.

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Published: 26 Mar 2015, 06:56 PM IST
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