created by Rajesh Dhruva

Foreign Currency Non - Resident (B) - [FCNR(B)]


returning NRI's CORNER – TAXATION OF Interest EARNED on FCNR(B) Deposits


For Returnee NRI as in case of a Person Resident Outside Indian ( PROI / NRI ) interest income of FCNR(B) account is exempt from Tax till his Residential Status under Income Tax Act,1961( IT Act ) is determined as “ Non Resident “  or  " Resident but Not Ordinarily Resident".


This exemption is granted vice Section 10(15)(iv)(fa) of the Income Tax Act, 1961.


Once his Residential Status under the IT Act is determined as " Resident & Ordinarily Resident" interest from FCNR(B) and Resident Foreign Currency ( RFC ) deposits will be taxable in India although under FEMA FCNR(B) deposits are allowed to be continued till maturity while RFC deposits are allowed to be maintained indefinitely.


If in the Year of return Returnee NRI's stay in India exceeds 181/119 days depending on his taxable income in India he will be a "Resident " in India during the Year of return. In India financial year commences on 1st April & ends on 31st March. 
He will also be treated as " Resident " if in the Year of return his stay  in India does not exceed 181/119 days but exceeds 59 days or more in Year of return AND also exceeds total of 364 days  in preceding 4 years .


BEING a Resident if the Returnee NRI has been :
A Not Resident in 9 out of 10 Financial preceding Years

Has not stayed in India for 730 days or more in 7 financial years, preceding that year, then although a Resident, he will be defined as "Resident but Not Ordinarily Resident".