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 days 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 days but exceeds 59 days or more in Year of return AND also exceeds total of 364 days  in preceding 4 years . Said period of 59 days is raised to 181or more days in two cases only being :

.01 An Indian citizen leaving India for employment outside India, and
.02 An Indian citizen or person of Indian origin i.e. an NRI residing outside India who is on a visit to India. THEREFOR in case of Returnee NRI BOTH conditions of 181 days OR 59 days & 364 days will apply.


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, than although a Resident, he will be defined as "Resident but Not Ordinarily Resident".


AND the Returnee NRI will be defined as  "Non Resident" under the IT Act  if his  stay in India did not exceed 181 days in the preceding  year
EVEN if stay did not exceed 181 days the same also did not exceed 59 days in the Year of return IF in the preceding 4 years  his total stay in India had exceeded 364 days.
 It is important to note that the day of arrival and the day of departure are both included in number of days of stay in India. 


This may seen bit complex but that is the way the Law is .