POSTED BY April 5, 2012 6:17 am COMMENTS (15)ON
Just want to bring up a point on the NRE FDs. Agreed that these interest rates are very good and is tax free in India. But is it worth for NRIs in USA? This is because, the interest on NRE FDs are tax free in India but not in USA. Any money earned anywhere in the world is taxable in US if a person is in USA. The only exception being if tax was already paid for that income in the respective country.
So what this means is NRE FDs are taxable in USA. And the tax in USA is much higher than that of India. For working NRIs who already have an income in USA, the tax on NRE FD interest will be more than 40%. Instead is it not better to keep these FDs in NRO account and pay 30% TDS?
One related question. if an NRI invests in an NRE FD for 10 years and for some reason comes back to India in between, will the NRE FD be broken?
Share your thoughts.