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Time of India
a day ago
- Business
- Time of India
Rupee fall makes diaspora's foreign currency deposits attractive
Chennai: The weakening rupee was among the reasons that made foreign currency deposits attractive for NRIs. The net inflow under Foreign Currency Non-Resident (B) Account (FCNR(B)) increased by 11% YoY from $6.4 billion in FY24 to $7.1 billion in FY25. It comes after NRIs pulled out their deposits earlier, turning the category (FCNR(B)) negative during 2020–21 and 2021–22. Data available in RBI's annual reports shows that FCNR (B) recorded a net outflow of -$3.8 billion and -$3.6 billion during two Covid years of 2020–21 and 2021–22, respectively. However, its net inflow revived during 2022-23 and stood at $2.4 billion. In FY25, the net inflow under non-resident deposits basket comprising Non-Resident External (Rupee) Account (NRE), Non-Resident Ordinary (NRO) Account and FCNR (B) was at $16.2 billion, the highest in the past 11 years. Of this, FCNR (B) share was 44%. RBI raising the interest rate caps on FCNR (B), allowing banks more freedom to offer better returns also fuelled its growth. You Can Also Check: Chennai AQI | Weather in Chennai | Bank Holidays in Chennai | Public Holidays in Chennai FCNR(B) account is a type of fixed deposit account designed specifically for NRIs and Persons of Indian Origin (PIOs). Its unique feature is that money is held in international currencies such as US Dollar (USD), British Pound (GBP), Euro (EUR), Australian Dollar (AUD), Canadian Dollar (CAD), Swiss Franc (CHF), and Japanese Yen (JPY), which protects depositors from exchange rate fluctuations. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Upexi's $100M Solana Investment: What It Means for Shareholders bullseyealerts Read More Undo While the duration of term deposits ranges from 1 year to 5 years, interest earned on FCNR(B) accounts is tax-free in India. Private sector South Indian Bank, which has a sizeable NRI customers base particularly in the Gulf countries, says it has experienced a steady growth in NRE, NRO, and FCNR(B) accounts over the last three financial years at 3%, 5% and 6%, in FY23, FY24, and FY25 respectively. "The relative strength and stability of foreign currencies such as the US dollar further incentivized NRIs to invest in these accounts. Additionally, the depreciation of the Indian Rupee enhanced the appeal of foreign currency deposits as a hedge against exchange rate risk," said Biji S S, senior general manager and head of branch banking, South Indian Bank. Tanvi Kanchan, head - NRI business & strategy, Anand Rathi Shares and Stock Brokers said, "Looking ahead to FY26, inflows are expected to rise further. This is because interest rates in India are still relatively high, and if rates fall in the US or other developed markets, India will become even more attractive for NRIs seeking better returns," Kanchan added.
Mint
23-06-2025
- Business
- Mint
What happens to the tax exemption on NRE and FCNR interest when I become an RNOR?
Q. I have been an NRI for the past 24 years. I have some NRE and FCNR deposits which will mature after 1-April-2026. If I come back to India in July 2025 for good, my residential status for AY-2026-2027 will be Resident but Not Ordinary Resident (RNOR). Do I have to liquidate all my NRE and FCNR deposits or can I hold these deposits up to maturity? How will my tax liability be determined for interest on such fixed deposits? Interest on NRE (Non-Resident External) deposits as well as FCNR (Foreign Currency Non-Resident) deposits are fully exempt in the hands of a non-resident as per the provisions of the Income Tax Act, 1961. When you come back to India with an intention to stay in India for an indefinite period, you become a resident under the FEMA (Foreign Exchange Management Act) laws immediately on your arrival in India. Once you become a resident under FEMA, you are required to convert your existing NRE accounts to either a regular resident rupee account or RFC (Resident Foreign Currency Account). While the deposits can be continued with the stipulated rate of interest till maturity, the interest after the date of your arrival in India will become taxable in India. The bank will deduct tax at source on the interest credited for the period post your arrival in India. As far as deposits in FCNR deposits are concerned, you can continue to have the FCNR deposits till their maturity, and on maturity, the deposits have to be converted into resident rupee accounts or transferred to RFC accounts. Unlike interest on NRE deposits, which becomes taxable once you become a resident under FEMA, interest on an FCNR account does not become taxable in India immediately on your coming back to India and will continue to remain tax exempt as long as you remain a non-resident or a resident but not an ordinary resident under income tax laws. Read all our personal finance stories here. Balwant Jain is a tax and investment expert and can be reached at jainbalwant@ and @jainbalwant on his X handle. Disclaimer: The views and recommendations made above are those of individual analysts, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
Mint
15-06-2025
- Business
- Mint
What are the tax rules for my children's Indian bank interest if they live abroad?
One of my kid is living and working in Luxembourg (permanent resident) and the second one is in the USA (Green Card holder). Both of them have bank interest income in India. Do they have to pay tax in their respective countries on Indian interest income? If yes, do they get some rebate in their respective countries on income tax paid in India or rebate in India on taxes paid abroad? It's a really common and important question for families with members living across borders. Since your children are permanent residents in Luxembourg and Green Card holders in the USA respectively, they are considered tax residents in those countries. This means their worldwide income, including any interest earned in India, needs to be reported and taxed in their resident countries. Here's how it works in three straightforward parts: Interest earned from Indian bank accounts is taxable in India under the Indian Income Tax Act. If the account is an NRE (Non-Resident External) account, the interest is exempt from tax in India. However, interest from NRO (Non-Resident Ordinary) accounts or fixed deposits is fully taxable at applicable slab rates. Both the USA and Luxembourg operate on a "worldwide income" principle. This means your children must declare and potentially pay tax on all their income, no matter where it's earned, including that Indian interest income. In the USA, your child must report this income on their IRS tax return, where it will be taxed according to US federal tax laws. Similarly, in Luxembourg, the interest income is also reportable and taxable under its domestic tax rules. Here's where the good news for avoiding paying twice comes in! India has double taxation avoidance agreements (DTAAs) with both the USA and Luxembourg. These agreements are designed to prevent your children from being taxed on the same income in both countries. If tax (TDS) has already been deducted in India on their interest income, your children can usually claim a foreign tax credit in their resident country (USA or Luxembourg). This credit reduces their tax liability in their resident country by the amount of tax already paid in India. For your children, disclosing their Indian interest income on their tax returns in the USA or Luxembourg is crucial. It's also vital they keep all Indian tax payment records (like Form 16A, Computation of Income, and their Indian Tax Return) to support their foreign tax credit claims. Given the complexities of cross-border taxation, it's highly recommended that your children consult a cross-border tax expert who understands the tax laws of both India and their country of residence. This will help them ensure full compliance and optimise their tax situation, as incorrect reporting can lead to penalties or loss of DTAA benefits. Ajay R. Vaswani - Founder - ARAS AND COMPANY, Chartered Accountants
Hindustan Times
03-06-2025
- Business
- Hindustan Times
5 things NRIs should keep in mind before investing in property in India
Anita Reddy, an NRI residing in the US, has decided to purchase a residential flat in Hyderabad to stay during annual visits. She has checked RBI rules, verified the property title, and applied for a home loan. She has authorized her father in India with power of attorney. NRIs can legally purchase residential and commercial properties in India under Foreign Exchange Management Act (FEMA) rules, but are not allowed to buy agricultural land, plantation property, or farmhouses unless acquired through inheritance or specifically approved by the Reserve Bank of India (RBI). When acquiring property, if the purchase is funded from abroad, the funds should be remitted into an NRE (Non-Resident External) account. 'The payment for the property must be made through this NRE account. It is important to retain the bank statement as proof of the source of funds. This documentation will be crucial if the NRI wishes to repatriate the proceeds from the sale of the property back to their country of residence,' says Ankit Jain, Partner, Ved Jain and Associates, chartered accountancy firm. 'They are also eligible for home loans from Indian banks and housing finance companies, with loan repayments made using these accounts as per RBI guidelines' says Anupam Rastogi, co-founder and chief business officer, Square Yards, a real estate marketplace. If the purchase is funded through income or funds already held in India, the NRI can use any domestic bank account for the payment. Additionally, while making payment to the seller, the NRI must ensure that Tax Deducted at Source (TDS) is properly deducted on the sale consideration, even if the NRI does not regularly file tax returns in India. Failure to deduct and deposit TDS can lead to a tax liability for the buyer. 'It is also advisable that, after acquiring the property, the NRI files annual income tax returns in India, even if the income generated from the property is below the taxable threshold. Maintaining a consistent tax record can simplify compliance and tax calculations when the property is eventually sold,' says Jain. Under the old tax regime one claims deductions on home loan principal under Section 80C and home loan interest under Section 24(b) of the Income Tax Act, if they have taxable income in India. The 3.5% US excise tax on remittances by non-US citizens increases the cost of investing in India, as it is charged to the sender and not creditable in India. 'NRIs should account for this cost, remitting more to receive the desired amount in INR. India does not tax inward remittances, so funds received through banking channels can be fully used. Where possible, joint remittance with a US citizen family member may reduce the burden,' says Gagandeep Sood, Associate Director, Fox Mandal Global, a professional services firm. India does not impose any limit on the amount NRIs can remit inward for property investment. Such remittances are freely permitted, provided the funds are from legitimate sources and routed through authorised banking channels. There is no tax on inward remittances by NRIs in India. Also Read: Government proposes bill for online property registration, documents. Here's what it means for you 'NRIs should maintain NRE accounts, as funds brought in through authorised banking channels comply with FEMA regulations. Although Indian Income Tax authorities do not require documentation for the 3.5% US remittance tax, it is advisable to retain records of the sender, transaction details, and purpose to establish the legitimacy and source of funds, especially in high-value transactions,' says Sood. These are the following documents that NRIs need to have in place when they plan to buy a property in India. Passport and OCI/PIO card:A valid passport is mandatory. If you hold an Overseas Citizen of India (OCI) or Person of Indian Origin (PIO) card, you can use it instead of an Indian passport. PAN card:Required for tax purposes, especially if you plan to rent out the property or sell it later. Proof of address: Both Indian and overseas address proof (utility bills, bank statements, or rental agreements) may be required. Power of attorney (if applicable): 'If you're not physically present in India for the transaction, you may need to authorize someone via a registered and notarized Power of Attorney (PoA),' says Ravi Shankar Singh, managing director, Residential Transaction Services, Colliers India, a real estate services firm. Proptech has really simplified the buying process for NRIs in India. Developers are also setting up camps in countries with a large Indian population. Most NRIs today are IT professionals or engineers who have gone abroad for short to medium term projects and with an intention to return to India. While deciding on this high involvement purchase NRIs should keep certain things in mind. They should choose a reputed developer with a credible track record. 'The selected city should offer employment upon their return. The location and city should offer great physical and social infrastructure, And finally it should have international airport connectivity,' says Shankar. 'Before finalizing a property deal, NRIs should verify the property's title, check for any legal encumbrances, ensure all government approvals and permits are in place, and consult a real estate lawyer. This due diligence helps avoid legal disputes, fraud, and ensures a smooth transaction,' adds Rastogi. Anagh Pal is a personal finance expert who writes on real estate, tax, insurance, mutual funds and other topics
