Tax Benefits

1. Bank Deposits are free from wealth tax in India.
2. Interest earned on NRE, FCNB and NRNR accounts is exempt from Indian income tax.
3. Gifts made out of NRE, FCNB and NRNR accounts are free from gift tax in India.
(Gift tax has been abolished for all types of gifts from the 1st October 1998.)

Tax Liability on Interest Income when a non resident returns permanently to India
NRE
The tax exemption under Sec.10(4) (ii) will cease from the day to NRI returns permanently to India

FCNB
Interest will continue to be tax-free till the maturity of the deposit.

NRO
Interest will continue to be taxable as before. However, while for non-residents, the interest on such accounts will attract 'Tax Deduction at Source'(TDS) at 30% in the case of residents, TDS will be at 10% if the interest payment is above Rs. 10000 in a financial year. Residents can submit declaration on Form 15 H to avoid TDS while such facility is not available for a non-resident The sections mentioned above refer to Income Tax Act 1961..

Basic conditions for a resident under the Income Tax Act
[Under Section 6 of the Income Tax Act 2961]
1. In India for 182 days or more during the previous year or 2.In India for 60 days or more during the previous year and 365 days or more during the 4 years prior to the previous year. Exceptions permitted to the Second Condition: a) A citizen who leaves India in any year for employment, is not treated as resident in that year, unless he has been in India for 182 days or more. b) A citizen or a person of Indian origin, who has gone abroad and comes to India on visit, is not treated as resident in that year, unless he has been in India for 182 days or more.

Additional Conditions
1. Resident in India in atleast 9 out of the 10 previous year prior to the previous year and
2.In India for 730 days or more (i.e. two years or more) during the 7 previous years prior to the previous year.

Resident and Ordinarily Resident (ROR)
If the individual satisfies either of the basic conditions, both the additional conditions.

Resident but not Ordinarily Resident (RNOR)
If the individual satisfies either of the basic conditions, but does not satisfy the additional conditions.

Non Resident (NR)
If the individual does not satisfy any of the Basic Conditions.