Deepika Kumari asked on 24/03/2020

What are the taxes on NRE deposit?

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SBNRI Team
answered on 24/03/2020

NRE Deposit is tax-free in India as NRE Accounts are meant to maintain the income earned outside India. If you withdraw the funds from your NRE Fixed Deposit Account before 1 year (premature withdrawal) no interest will be paid on the NRE deposit.

 

The NRE account can be opened for the purpose of maintaining the income earned outside India with tax free interest (upto 7.60%*) on Fixed Deposits. Both the principal amount and interest earned are completely repatriable from India. Although, domestic credits aren’t allowed.

 

Also Read: Is this the right time to book NRE Deposits in India?

Comparison between NRE Deposit, NRO & FCNR Fixed Deposits:

Factors to consider

Non Resident External (NRE) Account

Non Resident Ordinary (NRO) Account

Foreign Currency Non Resident (FCNR) Account

Purpose

For income earned outside India

For income earned from India (pension, rent etc.) 

Foreign Currency Investment in India

Currency

INR

INR

USD, GBP, EUR, JPY, CAD, AUD, SGD, HKD and CHF

Tenure of Deposits

1 year to 10 years

7 days to 10 years

1 year to 5 years

Interest

Up to 6.80%*

Up to 7.30%*

Up to 4.05%*

Repatriation

(transfer of money from Indian bank account to foreign bank account) 

Both Principal (money invested initially) and Interest completely repatriable

Up to a maximum of 1 million USD per financial year

Both Principal and Interest completely repatriable

Tax Deductions

No tax

Tax on Interest earned (not on principal amount): 30% tax + surcharge + education cess will be deducted at the source of interest earned in India

No tax

 

 

Ask SBNRI Tax Expert Now

 

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