Are Funds in the NRE Account Freely Repatriable After Return?

No, once your residency status changes, the rules for repatriation will also change, and funds must be held in resident accounts with normal repatriation limits

Do Tax Authorities Track NRE Account Status After NRIs Return?

Yes, banks do track changes in status, and the tax authorities expect NRIs to update account classification to prevent any potential legal and tax issues.

NRI Banking Services

When Does an NRIs NRE Account Lose Tax-Free Status in India?

By Pankaj Shaw |Last Updated: November 13, 2025

When Does an NRIs NRE Account Lose Tax-Free Status in India?

An NRI's NRE account loses its tax-free status in India as soon as their residential status changes from Non-Resident Indian to Resident in India as per the provisions of the FEMA (Foreign Exchange Management Act). A person is considered an Indian resident under FEMA when they return to India to stay permanently, such as for employment, to start a business, or a profession, etc. In this blog, we will learn about an NRE account, RNOR status, and when an NRE account loses its tax-free status.

An NRE (Non-Resident External) account is for NRIs to keep their foreign earnings in India. It is a rupee-denominated account where you can deposit money in foreign currency. However, withdrawals can be made only in Indian rupees.

Pankaj Shaw(Tax Expert)

Mr Shaw brings 8 years of experience in auditing and taxation. He has a deep understanding of disciplinary regulations and delivers comprehensive auditing services to businesses and individuals. From financial auditing to tax planning, risk assessment, and financial reporting. Mr Shaw's expertise is impeccable.

Frequently Asked Questions

Interest on an NRE account remains tax-free in India till the time you maintain your Non-Resident Indian (NRI) status.

Your NRE account loses tax-free status upon becoming an Indian resident under the Income Tax Act and FEMA (generally staying in India for 182 days or more in a financial year).

No, you need to convert your NRE account to a resident savings or current account within 90 days of a change in your residency status.

The principal you deposit when you had the NRI status will remain exempt from taxation. However, the interest earned after becoming a resident will be subject to taxation.

If you don't convert your NRE account upon becoming a resident, the interest accrued will become subject to taxation. Also, the account operation may violate the rules of FEMA, which may lead to penalties.

When Does an NRIs NRE Account Lose Tax-Free Status in India?

Frequently Asked Questions

When is Interest Earned on My NRE Account Tax-Free?

What Affects the Loss of Tax-Free Status For an NRE Account?

Can I Continue to Hold an NRE Account After Becoming a Resident?

Is the Principal in the NRE Account Taxable When you Become a Resident?

What Happens if I Don't Convert My NRE Account After Becoming a Resident?

When Does an NRIs NRE Account Lose Tax-Free Status in India?

Frequently Asked Questions

When is Interest Earned on My NRE Account Tax-Free?

What Affects the Loss of Tax-Free Status For an NRE Account?

Can I Continue to Hold an NRE Account After Becoming a Resident?

Is the Principal in the NRE Account Taxable When you Become a Resident?

What Happens if I Don't Convert My NRE Account After Becoming a Resident?