Understanding India's taxation on NRI children's interest income
If you're an Indian-origin child who's moved abroad and become an NRI, the way your Indian bank interest gets taxed changes.
The rules depend on what type of account you have and whether you're considered a resident or not under Indian law.
NRE vs NRO accounts
Once you become an NRI, your regular savings account needs to be switched to either an NRO or NRE account.
Interest from NRO accounts (including fixed deposits) gets hit with a flat 30% tax before it even reaches you.
But if your money's in an NRE or FCNR account—and you qualify as an NRI—that interest is totally tax-free in India.
If you're under 18, how does this work?
If you're under 18, any interest earned usually gets added to the richer parent's income (unless it comes from your own work or special skills).
This can bump up how much tax your family pays, so it's something parents should keep in mind.
Things to remember
Don't forget: this interest income has to be reported on Indian tax returns—either yours or your parent's—to avoid penalties.
If you're also paying tax on this money abroad, NRIs can claim credit using Double Taxation Avoidance Agreements by submitting a Tax Residency Certificate and Form 10F.
That way, you don't get taxed twice on the same cash.