Is the interest on my NRE account taxed in India?
The three account types are not taxed alike, and the answer turns on which category your deposit is validly held in rather than on which bank holds it. Where the interest is taxable in India, the bank deducts at source when it credits it. Where it is not, the treatment rests on the account being properly held as a non-resident account, which is why a change in your residency status matters so much. An account that should have been redesignated and was not can be credited on one footing while your return has to be filed on another. Check the category before assuming the treatment.
What is the difference between NRE, NRO and FCNR accounts?
Three things, and the interest rate is only one of them. They differ in currency: one holds foreign currency, so the balance does not move with the rupee, and the others hold rupees, so it does. They differ in whether the interest they pay is taxable in India, and therefore in whether the bank deducts at source when it credits it. And they differ in how freely the balance can leave the country. Choosing between them is a decision about currency risk, tax treatment and repatriability at once, and the right answer depends on where the money came from and what it is for.
Why is my bank deducting tax on my NRO interest?
Because that interest is taxable in India, and where interest is taxable the bank deducts when it credits it. The bank is not exercising judgement about your position as a whole: it applies the rate the account and your status require and deposits the amount against your tax identifier. The non-resident rate is generally higher than the tax the same income bears once your actual liability is computed, so the deduction is something to reconcile rather than a final tax. That reconciliation is done by filing an Indian return, and it is an annual exercise rather than a one-off.
Which account should rent from my Indian flat be paid into?
Rent arising in India is Indian income and belongs in the account category Indian-source receipts are meant to sit in, not in an account funded from your earnings abroad. Mixing the two is the most common account error we see, and it is hard to unpick later. Once Indian receipts have been credited to an account intended for foreign-earned funds, the history of the balance no longer matches the category it sits in, and both the treatment of the interest and the route the money can take out of India become arguable. Keep the two apart from the start.
Do I have to change my accounts when I move back to India?
Yes, and in the other direction too. Redesignating an account on a change of residency status is a compliance step, not an administrative courtesy the bank handles quietly in the background. Non-resident accounts exist because the holder is non-resident; when that stops being true the accounts have to follow, and until they do, interest is credited and reported on a footing your return cannot support. The same applies on the way out: resident accounts do not become non-resident accounts because you have moved. Tell the bank in writing and keep the confirmation with your tax papers.
Does an FCNR deposit protect me from the rupee falling?
That is the purpose of holding a deposit in foreign currency. The balance is denominated in the currency it was placed in, so the rupee moving does not change what you get back in that currency. A rupee deposit does the opposite: the interest may look better and the exchange rate carries the risk. But currency is only one of the three variables. The tax treatment of the interest and the freedom with which the balance can leave India differ by account type as well, and a choice made on the exchange rate alone tends to create a problem on one of the others.
What are Forms 15CA and 15CB for?
They clear a payment out of India. Form 15CA is the remitter's declaration of the payment and the tax withheld on it; Form 15CB is an accountant's certificate on the taxability of the amount, the treaty article relied on and the correct withholding rate. The bank generally will not execute the transfer without them, in the categories where they are required. The work is deciding the rate correctly, because the certificate is the record of that decision. See 15CA and 15CB certification.
Is money received in India from abroad taxable?
Receiving your own money is not income, and a gift from a specified relative is exempt however large. Two things do bite. A gift from someone outside that relative list is taxable to the recipient once the year's receipts pass the threshold in the gift provisions. And money that is really payment for something — fees, rent, interest, a share of profit — is taxed as that income whatever the bank narration says. The paperwork should match the substance. See gifting money to family in India.
