NRI accounts to be exempt from tax

In a major benefit to NRIs, finance minister P Chidambaram today extended tax exemption on interest in non-resident (external) account and on interest payable by a scheduled bank to non-resident Indians.

At present, interest income accrued before March 31, 2005, on money deposited in an NR(E) account in any bank is exempt from income tax.

Similarly, the interest payable by a scheduled bank before April 1, 2005 to a non-resident or a person who is not ordinarily resident on deposits in foreign currency where the acceptance of such deposits by the bank is approved by the RBI is exempt from income tax.

Both these exemptions would now also be available after April 1, 2005, as per the budget proposals for 2005-06.

However, these amendments would be in effect from April 1, 2006, and apply in relation to the assessment year 2006-07 and subsequent years.