Came back to India after living in America for 5 years. For how long can I maintain NRE, FCNR accounts?

As long as a person is a non-resident under the provisions of the Foreign Exchange Management Act (FEMA), he can have an NRE account. becomes a non-resident FEMA As soon as he comes back to India for good or indefinitely. Hence you have become a resident under FEMA from the day you landed in India. Hence your NRE accounts need to be redesignated as resident accounts immediately on your return to India. Alternatively, you can transfer funds lying in your NRE account from permitted currencies to a Resident Foreign Currency (RFC) account in the currency of your choice. Once the account is re-designated as a resident account, the interest received on it becomes fully taxable in India.

As regards deposits in FCNR account, you are permitted to continue with your FCNR deposits till maturity. However, the interest received on FCNR account is tax free only as long as you are a non-resident or not a normal resident under the Income Tax laws. Since you do not fulfill the conditions of not being considered as a normal resident for even one year and you will become a direct resident on fulfilling the basic conditions for the current year. Interest for the entire year on your FCNR deposit will become fully taxable in India from the current financial year. If you don’t want to take the risk of exchange rate fluctuations or want to go back again in future, here again you can either get the FCNR deposit converted to Rupee account or transfer the proceeds to RFC account Huh.

Balwant Jain is a tax and investment specialist and can be reached on Twitter at jainbalwant@gmail.com and @jainbalwant.

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