NRIs returning to India for good should get their NRE accounts re-designated

I am a non-resident Indian (NRI) and have not been in India for more than 730 days in the preceding seven years. I would become a resident in India soon and would like to know whether the interest on non-resident external (NRE) deposits already placed with banks in India before becoming a resident would be subject to income tax from next year onwards. Also, please advise if tax is exempted, and how long can I get exemption on such interest income?

—Name withheld on request

Assuming that you have been living outside India and your residential status is that of an NRI as per the Income-tax Act, the interest earned from NRE deposits shall be exempt for you. However, when you return to India for good and intend to stay here for an indefinite period, you must immediately intimate your bank so that they can re-designate your deposit account from a non-resident to resident account. This is as per the Reserve Bank of India (RBI) regulations. Once these accounts have been re-designated, interest earned on the deposits shall be taxable in your hands, even though your status as per the Income-tax Act may be non-resident or resident but not ordinarily resident. Therefore, immediately upon your return to India, such deposits shall be re-designated to resident deposits and interest earned from them shall become taxable for you.

I am an NRI settled in Canada (with permanent residency) since the last two years. I had no India income in FY2018-2019 but had a home loan (self-occupied) before leaving. The home loan got over in October 2018. Do I get any deduction for home loan interest payment for the period April-October 2018 under Section 24B? Do I get any deductions under Section 80C for principal amount paid in FY19? My income from all sources is nil. I have an insurance premium which I pay out of my money lying in the NRO-NRE account. Do I get a deduction for that? I am a little confused as there is no income. Will these tax deductions result in any refund?


You can report the interest payments made for your self-occupied house property in your income tax return. You can claim a maximum deduction of 2 lakh under Section 24(b) towards interest paid on a home loan for a self-occupied property. This will result in loss under the head “house property” in your income tax return. This loss can be carried forward to eight financial years and can be set off in future if there is any income under the head house property in the eight following years. Deductions are reduced from taxable income for the purpose of calculation of income tax. Since there is no taxable income, deductions will not lead to a refund situation for you. Refund arises when tax was deposited but no tax was due from you. If no tax is paid by you or deducted from any of your incomes, no refund is due to you.

Archit Gupta is founder and chief executive officer, ClearTax. Queries and views at

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