I have come back to India after seven years working abroad and my NRNR rupee deposits and foreign currency deposits are still running. Do the non-resident concessions stop the day I become resident, and when is the interest taxed?
No, they do not stop automatically. The Authority ruled that Hari Gopal Chopra, who returned to India on 24 May 1996 after employment in Zambia, remained entitled to the Chapter XII-A benefits under s.115H after becoming resident, provided he filed the written declaration that section requires with his return. It also ruled that interest on his non-resident non-repatriable rupee deposits was taxable only in the year the deposits matured, because nothing had been credited to his account before then, and that interest on his foreign currency deposits with a scheduled bank was exempt under s.10(15)(iv)(fa) for assessment year 1997-98 and later years for which he was found resident but not ordinarily resident. The ruling binds only the applicant.
Pronounced by the Authority for Advance Rulings (Authority for Advance Rulings - S. Ranganathan, J. (Chairman) and Subhash C. Jain, Member) on 1997-09-24, reported as [1999] 237 ITR 135 (AAR). It bears on section 6(6), section 10(15)(iv)(fa), section 115C, section 115H, section 145 of the Income Tax Act 1961, in Residence & Treaty Benefit and Capital Gains Exemptions matters.
This is the ruling that answers a returning NRI's three practical questions in one place: does Chapter XII-A survive the change of status, when does deposit interest become taxable, and does the foreign currency exemption run on. The department's usual counter is that the concessions die with non-residence and that interest accrues year by year whether or not it is credited. Two things in the ruling are worth taking. First, entitlement under s.115H is conditional on the declaration going in with the return - the Authority said yes 'subject to a declaration being filed'. Second, on the accrual point the departmental representative conceded that no interest had been credited to the account until maturity, and the Authority held that in the absence of a credit there was nothing to tax on accrual. That is a fact-specific concession, not a rule about all deposits, and it should be pleaded with the bank's confirmation behind it.
Binding only on the applicant who sought it, in respect of the transaction the ruling was sought on, and on the Principal Commissioner or Commissioner and the authorities subordinate to him in respect of that applicant and that transaction — and only until the law or the facts change (section 245S). It binds nobody else. The Tribunal and the courts nonetheless treat a considered ruling as persuasive, which is why practitioners cite them.
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The applicant, a chartered accountant, left India on 23 October 1989 to take up employment in the Republic of Zambia with a corporation owned by the Government of Zambia, was paid in US dollars and in local currency, and was allowed to remit his savings in convertible foreign currency to a country of his choice. He visited India for 49 days between 18 February 1991 and 8 April 1991 and for 32 days between 18 December 1994 and 18 January 1995, so his stay never exceeded sixty days in any financial year, and he filed a photocopy of his passport in support. He returned to India on 24 May 1996. Out of his earnings abroad he maintained non-resident non-repatriable rupee deposit accounts and a US dollar foreign currency account with the Bank of India, NRI branch, Parliament Street, New Delhi, held jointly with his wife. The NRNR deposits were due to mature in March and May 1999; the foreign currency deposits matured on various dates in July and August 1997. He was being assessed in India as a non-resident by the Assistant Commissioner of Income-tax, Non-Resident Ward, Delhi. He asked the Authority three questions: whether he remained eligible for s.115H after becoming resident; whether, keeping his accounts on cash basis, interest on the NRNR deposits was taxable in the year of maturity; and whether interest on the foreign currency account was exempt under s.10(15)(iv)(fa) while he was resident but not ordinarily resident.
All three questions were answered in the applicant's favour. On the first, yes, subject to a declaration being filed in accordance with s.115H. On the second, yes - the investment income by way of interest on the NRNR rupee deposits is taxable in the year the deposits mature. On the third, yes, for assessment year 1997-98 and subsequent assessment years for which the applicant is found to be resident but not ordinarily resident. The Authority first recorded that although the applicant was resident in the financial year 1996-97 when he applied, the application was maintainable on the authority of its own earlier ruling in Monte Harris v. CIT [1996] 218 ITR 413 (AAR).
On the first question the Department's written report had taken the point that the applicant had not invested in a 'specified asset' within s.115C(f). At the hearing the departmental representative conceded that s.11 of the Banking Companies (Acquisition and Transfer of Undertakings) Act 1980 deems every corresponding new bank named in the First Schedule to that Act to be an Indian company, so the objection could not stand; the Authority added that it had held the same in Advance Ruling Application No. P-5 of 1995, In re [1997] 223 ITR 379, where it ruled that every nationalised bank is deemed an Indian company for the purposes of the Act and that assets deposited with such a bank attract s.115C read with s.115H. Entitlement was therefore conditional only on the s.115H declaration. On the second question the Authority set out s.145 both as it stood and as substituted by the Finance Act 1995 with effect from 1 April 1997, and worked through the cases counsel put to it: CIT v. Sachindramohan Nandy [1984] 146 ITR 597 (Cal) on the difference between the mercantile and cash systems, and N. R. Sirker v. CIT [1978] 111 ITR 281 (Gauhati) on taxing on the cash system where no method is indicated. The Department relied on Indulal Kanji Parekh v. CIT [1987] 163 ITR 102 (Guj), which the Authority distinguished because there the interest had been credited to the non-resident account, even if temporarily. Since the departmental representative accepted that these deposits were repayable with interest only at the end of the stipulated period and that no interest had been credited until maturity, there was no accrual to tax. On the third question the Authority set out s.6(6), noted that the applicant had been in India for a total of 81 days between leaving and returning, and read s.10(15)(iv)(fa) as exempting interest paid by a scheduled bank on foreign currency deposits approved by the Reserve Bank of India to a person who is non-resident or not ordinarily resident. If he held that status when the deposits matured, no liability arose.
It is thus clear that in the absence of any interest being credited in the account of the applicant, there could be no liability to pay tax on the basis of accrual of interest.
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Handle my notice → Ask a CA on WhatsAppNo, they do not stop automatically. The Authority ruled that Hari Gopal Chopra, who returned to India on 24 May 1996 after employment in Zambia, remained entitled to the Chapter XII-A benefits under s.115H after becoming resident, provided he filed the written declaration that section requires with his return. It also ruled that interest on his non-resident non-repatriable rupee deposits was taxable only in the year the deposits matured, because nothing had been credited to his account before then, and that interest on his foreign currency deposits with a scheduled bank was exempt under s.10(15)(iv)(fa) for assessment year 1997-98 and later years for which he was found resident but not ordinarily resident. The ruling binds only the applicant. This was decided by the Advance Ruling (Authority for Advance Rulings - S. Ranganathan, J. (Chairman) and Subhash C. Jain, Member) and bears on section 6(6), section 10(15)(iv)(fa), section 115C, section 115H, section 145 of the Income Tax Act 1961. It is reported as [1999] 237 ITR 135 (AAR). This is the ruling that answers a returning NRI's three practical questions in one place: does Chapter XII-A survive the change of status, when does deposit interest become taxable, and does the foreign currency exemption run on. The department's usual counter is that the concessions die with non-residence and that interest accrues year by year whether or not it is credited. Two things in the ruling are worth taking. First, entitlement under s.115H is conditional on the declaration going in with the return - the Authority said yes 'subject to a declaration being filed'. Second, on the accrual point the departmental representative conceded that no interest had been credited to the account until maturity, and the Authority held that in the absence of a credit there was nothing to tax on accrual. That is a fact-specific concession, not a rule about all deposits, and it should be pleaded with the bank's confirmation behind it. If it applies to you, the first step is this: File the s.115H declaration in writing along with the return for the first assessment year in which you are assessable as resident; on this ruling the benefit is conditional on it, not automatic.
The applicant, a chartered accountant, left India on 23 October 1989 to take up employment in the Republic of Zambia with a corporation owned by the Government of Zambia, was paid in US dollars and in local currency, and was allowed to remit his savings in convertible foreign currency to a country of his choice. He visited India for 49 days between 18 February 1991 and 8 April 1991 and for 32 days between 18 December 1994 and 18 January 1995, so his stay never exceeded sixty days in any financial year, and he filed a photocopy of his passport in support. He returned to India on 24 May 1996. Out of his earnings abroad he maintained non-resident non-repatriable rupee deposit accounts and a US dollar foreign currency account with the Bank of India, NRI branch, Parliament Street, New Delhi, held jointly with his wife. The NRNR deposits were due to mature in March and May 1999; the foreign currency deposits matured on various dates in July and August 1997. He was being assessed in India as a non-resident by the Assistant Commissioner of Income-tax, Non-Resident Ward, Delhi. He asked the Authority three questions: whether he remained eligible for s.115H after becoming resident; whether, keeping his accounts on cash basis, interest on the NRNR deposits was taxable in the year of maturity; and whether interest on the foreign currency account was exempt under s.10(15)(iv)(fa) while he was resident but not ordinarily resident. The matter was decided on 1997-09-24 by the Advance Ruling (Authority for Advance Rulings - S. Ranganathan, J. (Chairman) and Subhash C. Jain, Member). On those facts the Advance Ruling held as follows. All three questions were answered in the applicant's favour. On the first, yes, subject to a declaration being filed in accordance with s.115H. On the second, yes - the investment income by way of interest on the NRNR rupee deposits is taxable in the year the deposits mature. On the third, yes, for assessment year 1997-98 and subsequent assessment years for which the applicant is found to be resident but not ordinarily resident. The Authority first recorded that although the applicant was resident in the financial year 1996-97 when he applied, the application was maintainable on the authority of its own earlier ruling in Monte Harris v. CIT [1996] 218 ITR 413 (AAR).
On the first question the Department's written report had taken the point that the applicant had not invested in a 'specified asset' within s.115C(f). At the hearing the departmental representative conceded that s.11 of the Banking Companies (Acquisition and Transfer of Undertakings) Act 1980 deems every corresponding new bank named in the First Schedule to that Act to be an Indian company, so the objection could not stand; the Authority added that it had held the same in Advance Ruling Application No. P-5 of 1995, In re [1997] 223 ITR 379, where it ruled that every nationalised bank is deemed an Indian company for the purposes of the Act and that assets deposited with such a bank attract s.115C read with s.115H. Entitlement was therefore conditional only on the s.115H declaration. On the second question the Authority set out s.145 both as it stood and as substituted by the Finance Act 1995 with effect from 1 April 1997, and worked through the cases counsel put to it: CIT v. Sachindramohan Nandy [1984] 146 ITR 597 (Cal) on the difference between the mercantile and cash systems, and N. R. Sirker v. CIT [1978] 111 ITR 281 (Gauhati) on taxing on the cash system where no method is indicated. The Department relied on Indulal Kanji Parekh v. CIT [1987] 163 ITR 102 (Guj), which the Authority distinguished because there the interest had been credited to the non-resident account, even if temporarily. Since the departmental representative accepted that these deposits were repayable with interest only at the end of the stipulated period and that no interest had been credited until maturity, there was no accrual to tax. On the third question the Authority set out s.6(6), noted that the applicant had been in India for a total of 81 days between leaving and returning, and read s.10(15)(iv)(fa) as exempting interest paid by a scheduled bank on foreign currency deposits approved by the Reserve Bank of India to a person who is non-resident or not ordinarily resident. If he held that status when the deposits matured, no liability arose. In the words reproduced by the source cited on this page: "It is thus clear that in the absence of any interest being credited in the account of the applicant, there could be no liability to pay tax on the basis of accrual of interest."
It was decided by the Advance Ruling on 1997-09-24 and is reported as [1999] 237 ITR 135 (AAR). Binding only on the applicant who sought it, in respect of the transaction the ruling was sought on, and on the Principal Commissioner or Commissioner and the authorities subordinate to him in respect of that applicant and that transaction — and only until the law or the facts change (section 245S). It binds nobody else. The Tribunal and the courts nonetheless treat a considered ruling as persuasive, which is why practitioners cite them. An advance ruling binds only the applicant who sought it, only for the transaction it was sought on, and only the Commissioner and the officers under him in relation to that applicant and that transaction — and only until the law or the facts change. That is section 245S, and it means the ruling is not a precedent and binds nothing in your case. You cite it because the Authority reasoned the point out, often first and most fully, and the Tribunal and the courts treat a considered ruling as persuasive. Check before you rely on one: most of these were pronounced before 2009, and a great deal of cross-border tax has been rewritten since by amendment, protocol and judgment. On section 6(6), section 10(15)(iv)(fa), section 115C, section 115H, section 145, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. All three questions were answered in the applicant's favour. On the first, yes, subject to a declaration being filed in accordance with s.115H. On the second, yes - the investment income by way of interest on the NRNR rupee deposits is taxable in the year the deposits mature. On the third, yes, for assessment year 1997-98 and subsequent assessment years for which the applicant is found to be resident but not ordinarily resident. The Authority first recorded that although the applicant was resident in the financial year 1996-97 when he applied, the application was maintainable on the authority of its own earlier ruling in Monte Harris v. CIT [1996] 218 ITR 413 (AAR). It arises in Residence & Treaty Benefit and Capital Gains Exemptions matters, on section 6(6), section 10(15)(iv)(fa), section 115C, section 115H, section 145 of the Income Tax Act 1961, and was decided by Authority for Advance Rulings - S. Ranganathan, J. (Chairman) and Subhash C. Jain, Member. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Get the bank to confirm in writing that no interest was credited to the account before maturity - that concession is what carried the second question. Before arguing that a bank deposit is a specified asset, check that the bank is a corresponding new bank in the First Schedule to the Banking Companies (Acquisition and Transfer of Undertakings) Act 1980, which s.11 of that Act deems to be an Indian company. Test residential status against s.6(6) as it now stands: the Finance Act 2020 added two further clauses to it that did not exist when this ruling was given. Do not cite this as binding on your client; under s.245S it binds only this applicant, this transaction and the Commissioner in relation to them.
Validity check could not be completed. Checked the text of s.115H of the Income-tax Act 1961 on the departmental site: it stands in the same terms the Authority set out, so that limb of the ruling has not been displaced by amendment. Searched for later judicial or departmental treatment of the ruling on Indian Kanoon, taxguru.in, casemine.com, taxmann.com and the departmental site and found none. Two checks could not be completed, which is why this is recorded as unverified rather than good law. First, the residence limb has moved: the Finance Act 2020 added clauses (c) and (d) to s.6(6) with effect from assessment year 2020-21, so the definition of 'not ordinarily resident' the Authority applied is now only part of a wider one. Second, the current text of s.10(15)(iv)(fa) was not read, and the equivalents of ss.115C, 115H and 10(15) in the Income-tax Act 2025 were not traced. The Authority itself no longer exists: three Boards for Advance Rulings were constituted by Notification No. 96/2021 dated 1 September 2021 under the Finance Act 2021, and their orders are appealable to the High Court under s.245W. The Income-tax Act 2025 comes into force from 1 April 2026. That finding was checked against a published source, which is linked on this page, on 2026-08-23. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The ruling does not state the amounts of the deposits, the rates of interest, or whether the applicant in fact filed the s.115H declaration. It records the applicant's assertion that he was the beneficial owner of deposits held jointly with his wife, whose name was said to have been added for nomination only, but it does not decide that point. The answer to the second question rests on the departmental representative's concession that no interest was credited to the account before maturity; a deposit on which interest is credited annually would not get the same answer, and the Authority distinguished Indulal Kanji Parekh v. CIT [1987] 163 ITR 102 (Guj) on exactly that ground. No second source was found for this ruling; the entry rests on the full text of the ruling itself. Note what an advance ruling actually does: under s.245S it binds only the applicant who sought it, only in respect of the transaction the ruling was sought on, and the Commissioner and the income-tax authorities subordinate to him in relation to that applicant and that transaction - and only for so long as the law and the facts on which it was pronounced remain unchanged. It binds nobody else, though a considered ruling of the Authority is treated as persuasive. The entry does not work out what happens after the deposits mature. Section 115H runs 'until the transfer or conversion (otherwise than by transfer) into money of such assets', and the ruling does not say whether reinvestment of the matured proceeds keeps the benefit alive. It does not tell the reader how s.115H sits with s.6(6) as amended in 2020, and it does not cover the Income-tax Act 2025 equivalents. The reported citation is taken from the Indian Kanoon page and has not been checked against the ITR volume. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
All three questions were answered in the applicant's favour. On the first, yes, subject to a declaration being filed in accordance with s.115H. On the second, yes - the investment income by way of interest on the NRNR rupee deposits is taxable in the year the deposits mature. On the third, yes, for assessment year 1997-98 and subsequent assessment years for which the applicant is found to be resident but not ordinarily resident. The Authority first recorded that although the applicant was resident in the financial year 1996-97 when he applied, the application was maintainable on the authority of its own earlier ruling in Monte Harris v. CIT [1996] 218 ITR 413 (AAR).
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