What are the tax concessions available to a returning NRI?
When an NRI permanently returns to India, the interest which he earns on NRE/ FCNR deposits with Indian banks and on government securities and company debentures is eligible for a flat income tax rate of 20%. These investments should have been made out of foreign exchange funds. This concessional tax rate will extend upto the maturity of these investments. An NRI, on returning to India, may choose to invest the balances in his NRE/ FCNR deposits in RFC accounts. Alternatively, he may convert these accounts into Resident Rupee accounts. His FCNR deposits can also be continued till maturity at the contracted rate of interest. The income from the Resident Rupee accounts will be taxable from the date of the NRI’s return to India. He also has the option of having this income taxed at a flat rate of 20%. In which case, he will not be able to claim any tax deductions.
