Is the interest on my NRE account taxable in India?
The exemption people have in mind is tied to non-residence under the exchange-control law, not to your tax return. That distinction matters, because the moment your status under that law changes, the treatment of the interest changes with it, whatever the return says. It also only answers the Indian half. Interest India does not tax is still income in the country you live in, which taxes residents on worldwide income and will not exempt it because India did. Clients are caught by exactly that gap: an account understood to be tax-free in India, fully taxable at home, and never reported.
What is the difference between an NRE and an NRO account?
The simplest way to hold them apart is by what each is for. An NRE account takes money brought in from abroad and is designed so that it can go back out again. An NRO account is for income arising in India — rent, dividends, a pension, the proceeds of something sold there — and carries deduction at source and tighter conditions on sending money out. Choosing by the interest rate, or by whichever the branch offered first, is how people end up with Indian income in the account meant for foreign funds. That contaminates the balance and makes a later transfer much harder to evidence.
Can I deposit my Indian rent into my NRE account?
That is the mistake the account structure exists to prevent. An NRE balance is meant to be traceable to funds brought in from outside India, which is what makes it straightforward to send out again. Putting Indian-source receipts into it breaks that trace and mixes money of two different characters in one balance. The problem surfaces later, when a remittance is requested and the bank looks at how the balance was built. Indian-source income belongs in the account designed for it, where the deduction at source happens as it should and the Indian filing reconciles it.
Do I have to report my NRE account to the CRA or IRS?
Assume yes until it has been checked. Both Canada and the United States require residents to report foreign financial accounts, and those reporting tests look at where the account is and what it holds, not at whether the interest happens to be exempt in India. An account paying no Indian tax is exactly the kind that goes unreported, because the holder does not think of it as producing anything. The consequences of a missed report attach to the failure to file rather than to any tax, so the cheapest year is always the one dealt with before a notice arrives.
What happens to my NRE account when I move back to India?
It stops being the right account, because it exists for a person living outside India. On return the account is redesignated, and any treatment that depended on non-residence stops applying from the point the status changes rather than at the end of the year. That mid-year break is what catches people: part of the year sits under one status and part under the other, and the bank records and the return have to reflect the same date. Fix the date first, on the evidence of the move as a whole, and the account change and the filing both follow from it.
Can I send money from my NRE account back out of India?
That is the account’s purpose, which is why what goes into it matters so much. Balances genuinely traceable to funds brought in from abroad, and the interest on them, are the straightforward case. Difficulty arises where Indian-source receipts have been credited into the same account, because the balance can no longer be shown to be what the account type assumes. The bank then asks questions the account was designed to make unnecessary. Keeping the two kinds of money in the two kinds of account is not bureaucracy. It is the thing that makes a later transfer a documentary formality.
Which countries have a tax treaty with the United States?
Around sixty, including Canada, the United Kingdom, India, Australia and most of western Europe — but the list matters less than the terms, because each treaty caps rates and allocates income differently. Two countries with treaties can produce opposite answers on the same pension or the same royalty. What decides your position is the specific article covering your income type. See our country guides.
Do I have to file in both countries?
Frequently yes, and the two filings do different jobs. The country where the income arises taxes it at source; the country where you are resident taxes your worldwide income and then gives credit for the tax already paid. Filing only one side is what leaves relief unclaimed — the credit has to be asked for on a return. We prepare both sides so the numbers agree. See dual filing.
