Q. Consider the following statements regarding NRI bank accounts in India:
1.NRE Account is held in Indian Rupees and both principal and interest are tax-free.
2.NRO Account is used to manage income earned in India and the interest is taxable.
3.FCNR (B) Account is held in foreign currency and is exempt from tax.
Which of the above statements is/are correct?

[A] 1 and 2 only

[B] 2 and 3 only

[C] 1 and 3 only

[D] 1, 2 and 3

Answer: D
Notes:

Explanation:

  • The Non-Resident External (NRE) account is maintained in Indian Rupees, meant for foreign income. It is freely repatriable and both principal and interest are tax-free in India.
  • The Non-Resident Ordinary (NRO) account is for managing income earned in India (like rent, dividends, etc.). The interest earned is taxable, and repatriation is subject to certain limits.
  • The Foreign Currency Non-Resident (Bank) account is held in designated foreign currencies. Both principal and interest are exempt from tax in India, and there is no exchange rate risk.

Source: Indian Economy (Ramesh singh)

Blog
Academy
Community