Back in India after 5-year stay in US. How long can I keep NRE, FCNR accounts? (2024)

I came back to India for good last week after staying in US for around 5 years. I have NRE rupee accounts and FCNR accounts in India. Could you let me know if I need to change these accounts to some other accounts? How long I can keep these accounts?

A person can have an NRE account as long as one is a non-resident under the provisions of Foreign Exchange Management Act (FEMA). A non-resident becomes a resident under FEMA as soon as he comes back to India for good or for an indefinite period. So you have already become a resident under FEMA the day you landed in India. So your NRE accounts have to be redesignated as resident accounts immediately on coming back to India. Alternatively, you can transfer the money lying in your NRE account to a Resident Foreign Currency (RFC) Account in currency of your choice from permitted currencies. Once the account is redesignated as resident account, interest received on it becomes fully taxable in India.

As far as deposits in FCNR account are concerned, you are allowed to continue to hold your FCNR deposits till its maturity. However, interest received on an FCNR account is tax free only as long as you are a non-resident or not ordinary resident under the income tax laws. Since you do not satisfy the conditions for being treated as not ordinary resident even for a single year and you will be a resident straightway on satisfying the basic conditions for the current year. The interest for the whole year on your FCNR deposits will become fully taxable in India from current financial year. Here again you can either get the FCNR deposits converted into rupee account on maturity or transfer the proceeds to an RFC account if you do not wish to take the risk of volatility of exchange rate or you wish to go back sometime in future again.

Balwant Jain is a tax and investment expert and can be reached onjainbalwant@gmail.com and @jainbalwant on Twitter.

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