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How to report interest on Indian NRE account-The account pays interest only once in 3 years. So for each year in between do I have to report interest accrued?

So the interest is paid only once in 3 years on this account (its a term deposit, so at the end of 3 years). In between if I cancel my deposit, I lose 1% of interest.So for a year in which interest is not paid out to me, do I still have to report interest accrued? Or do I report all the interest earned at the end of 3 year period?

Also since the Indian Rupee is losing value against the US Dollar, how to I account for this loss when eventually the interest is paid out to me (credited to my account after 3 years).
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Accepted Solutions
PatriciaV
Employee Tax Expert

How to report interest on Indian NRE account-The account pays interest only once in 3 years. So for each year in between do I have to report interest accrued?

As a cash-basis taxpayer, you report only the actual cash you receive from your investments. If the interest is paid out once every three years, you would report this income only when the interest is actually paid.

Accrued interest is not be reported on your tax return. 

Changes in value from market or exchange rates are not tax deductible.

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1 Reply
PatriciaV
Employee Tax Expert

How to report interest on Indian NRE account-The account pays interest only once in 3 years. So for each year in between do I have to report interest accrued?

As a cash-basis taxpayer, you report only the actual cash you receive from your investments. If the interest is paid out once every three years, you would report this income only when the interest is actually paid.

Accrued interest is not be reported on your tax return. 

Changes in value from market or exchange rates are not tax deductible.

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
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