Is the interest on my NRE account taxable in India?
The treatment of that account follows your status under India's exchange rules, not the label printed on the passbook. While you genuinely hold non-resident status, the favourable treatment that makes these accounts attractive applies. When the status changes, it falls away, and the account is meant to be redesignated rather than quietly carried on. The trap is that nothing happens automatically: banks act on what their records say, and those records are only as current as the last thing you told them. So for most people the answer turns on whether the designation still matches the facts.
Why did my bank deduct tax on my deposit interest?
Almost always because of how the account is classified in the bank's system, rather than because anyone formed a view about your position. Deduction at source happens before exemptions are weighed; that is the design. If the account has been redesignated, or was never converted after a move in either direction, the deduction follows the record. Ask the branch for the deduction certificate and check what status it shows against your name. That one document usually explains the whole thing, and it is also what you need in order to claim the money back.
Do I need to declare my Indian interest on my Canadian return?
Yes. Canadian reporting covers income from abroad, and interest earned on Indian deposits belongs on the Canadian return whether or not India took anything off it. Separately from the income itself, holdings outside Canada can bring Canada's foreign property reporting into play, which is a disclosure obligation rather than a second tax. The Indian and Canadian years do not align, so interest credited across April to March has to be recut onto the calendar year before it goes on the Canadian return. Bank statements, rather than annual certificates, are what make that possible.
What happens to my NRE account when I move back to India?
It has to be redesignated, and the moment that matters is tied to your return rather than to the day you get round to visiting the branch. The favourable treatment attaches to non-resident status, so it ends when the status does. Deposits already running are often allowed to continue to their term under their own rules, which is worth checking account by account rather than assuming. Do the redesignation early. Leaving it means deductions and reporting that reflect a status you no longer hold, and unpicking that costs more than the conversation with the bank.
Is NRO interest treated the same way as NRE interest?
No, and confusing the two is the most common mistake in this area. The ordinary rupee account is the one where tax comes off the interest at source as a matter of course, so people holding both often see a deduction on one and nothing on the other and assume something has gone wrong. It has not. What follows is a reconciliation: the deduction is set against the real liability on the Indian return and anything taken beyond it comes back. Keep the certificates for the two accounts separate when you file.
Can I claim back the tax my bank deducted on Indian deposits?
Yes, by filing the Indian return for the year concerned and setting the deductions against what is actually due. This is the ordinary shape of an Indian filing for someone living abroad: money has already been collected at source, and the return is where it is reconciled and the balance recovered. Older years can often still be dealt with, although the route is different and the evidence has to be better. Gather the deduction certificates for every account at every bank first, because a refund is only as complete as the certificates behind it.
Who is an NRI for tax purposes?
Residence in India is decided by days present in the tax year, with a second limb that also counts days over the preceding four years, and separate rules for Indian citizens leaving for employment. Fall outside the tests and you are non-resident, taxed in India only on Indian-source income. Between full residence and non-residence sits RNOR — resident but not ordinarily resident — which shelters foreign income for a limited window after returning. See RNOR status.
What is RNOR status and why does it matter to a returning NRI?
Resident but Not Ordinarily Resident is a transitional Indian status that can apply for a limited period after you return, based on how long you were non-resident before. While it lasts, certain foreign income stays outside the Indian net that would be taxed once you become an ordinary resident — which makes the timing of a return date, and of realising foreign gains, a genuine planning decision rather than an administrative one. See the RNOR window.
