How will interest on NRE FD treated when is not NRI ?

POSTED BY RAJANNA K V ON December 2, 2014 5:13 pm COMMENTS (2)

Dear Manish,

Interest earned on NRE FD is Tax Free, but when NRI becomes Resident & the FD still not matured. In this case is the interest earned still Tax Free upto its maturity? immaterial of NRI or Resident. Please give your valuable advise.

Rgds,
Rajanna K V

2 replies on this article “How will interest on NRE FD treated when is not NRI ?”

  1. dnsak says:

    I have exactly the same query and looking for answer. All my Banks are confused. one says NRE FDs needs to be converted into resident FDs and interest earned will be taxable from the date I will become resident. My other Bank says NRE Fd can continue till maturity on contracted interest rate till maturity but tax part they say consult your CA. So still no clear answer. Only one CA has said once status is changed from non resident to resident interest earned earned on NRE FDs will be taxable. If this is the case then there will be big loss due to tax on interest earned on these NRE FDs . I did these long term NRE Fds with quaterly interest with idea of regular tax free regular income for future. If you get right answer please tell me too.
    an NRI

  2. RAJANNA K V says:

    Dear Manish,

    Lat me explain in detail.
    Now I am an NRI & have my NRE FDs which will get mature on 15.12.2017. Now whatever Interest I am earning on NRE FDs is Tax free. Suppose if I return back to India say next year March/April-2015 once for all & become Resident but, still my FDs have maturity period balance. So when I become Resident & my NRE FDs still not matured & will mature on 15.12.2017. So after becoming Resident is the interest earned on the existing FDs whose maturity will be on 15.12.2017 is still Tax Free? Hope it is clear now. Request you to kindly clarify.

    Rgds,
    Rajanna K V.

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