Q595. Should UK citizen pay tax in India on bank interest from NRE - NRO accounts

Question: Dear Mr. Chand,

I am a UK citizen ,Indian origin I sent money to India to purchase a house As the construction is delayed the money still lies in the Indian bank as fixed depose on NRO,NRE accounts Should I have to pay tax to Inland Revenue for the interest I earned in India If so how much is the tax? Thanks Prasandhya

Answer: Interest earned from money deposited in NRE accounts is not taxable in India. On the other hand the interest earned on money deposited in NRO accounts is taxable. However, If your taxable income consisted only of investment income and tax has been deducted at source, then you need not file a tax return in India. The bank where you have your NRO account, as per rules, will deduct TDS on the interest earned. You could consider filing a tax return if you wish to get back some of the tax deducted in the form of TDS by your bank. Generally where the account holders income in India is below the tax exemption limit, which currently is Rupees 2 lakh in a financial year. Then filing a tax return to claim back tax deducted can be considered. While there is no tax on NRE account interest in India. You may still have to pay tax in your home country by declaring the full amount of interest received in India from both your NRO and NRE accounts.

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