1374. Whether deposits held by a person of Indian origin or citizen in NRE Account during his residence in the foreign country will also be exempt under clause (xxxiii) of sub-section (1)
1. The provisions of section 6 of Wealth-tax Act, read with section 10(4A) of the Income-tax Act, allow exemption from wealth-tax on the moneys lying to the credit in a Non-resident (External) [NRE] Account belonging to a person resident outside India within the meaning of section 2(q) of the Foreign Exchange Regulation Act, 1973. Section 5(1)(xxxiii) provides that in the case of an assessee, being a person of Indian origin or a citizen of India who was ordinarily residing in a foreign country and who has returned to India with the intention of permanently residing in India, moneys and the value of assets brought by him into India and the value of the assets acquired by him out of such moneys are exempt from wealth-tax for a period of seven successive assessment years commencing with the assessment year next following the date on which such person returned to India.
2. A question has arisen as to whether the moneys deposited by a person of Indian original or a citizen of India in a NRE Account during the course of his residence in the foreign country will also be eligible for the deduction under section 5(1)(xxxiii) as stated above.
3. The moneys to the credit in a NRE Account held by a person resident outside India as defined in the Foreign Exchange Regulation Act, are exempt from wealth-tax in India under section 6 of the Act. It is further clarified that it would also be exempt from wealth-tax under section 5(1)(xxxiii ), for a period of seven successive assessment years after the return of an Indian citizen or a person of Indian origin, hitherto ordinarily residing in a foreign country with the intention of permanently residing in India.
Circular : No. 411 [F. No. 317/5/85-WT], dated 25-2-1985.
JUDICIAL ANALYSIS
EXPLAINED IN – The above circular was explained in Dr. V.P. Gopinathan v. CWT [1996] 221 ITR 401 (Ker.), with the following observations :
A reference to Circular No. 411 dated February 25, 1985, of the Central Board of Direct Taxes would show that this exemption is understood to be applicable even by the Department with regard to the monies deposited by such an assessee in a Non-resident (External) Account during the course of his residence in the foreign country. Equally, whether the assets are acquired in India or in the foreign country also would have no importance in the context provided the assets are acquired out of such monies which are either brought by him or which are deemed to have been brought by him by virtue of the addition of Explanation 2
