Joint Fixed Deposit with Parents as an NRI: Who Is Taxed? (2026)
Who pays tax on a joint FD, what the Mumbai tribunal's 30 April 2026 order shows, the RBI rules on joint NRE and NRO accounts, and the papers to keep
Short answer: interest on a joint fixed deposit is taxed in the hands of the person whose money it is, not simply the person named first. But banks deduct TDS under the first holder's PAN, and the tax department sees every name. If an NRI and a parent hold a deposit together, keep proof of who funded it, because a holder who cannot show the source may be taxed on all of it.
Key points
- An NRI can hold an NRE or NRO account jointly with a resident relative, on a 'former or survivor' basis (RBI).
- Interest on an NRE account is exempt from Indian income tax for NRIs. Interest on an NRO account is taxable, with TDS.
- The person who contributed the money is generally treated as the owner of the deposit and is taxed on the interest.
- TDS on a joint deposit is usually deducted in the name of the first holder.
- In an order dated 30 April 2026 and reported on 30 October 2026, the Mumbai bench of the Income Tax Appellate Tribunal sent back a ₹2.59 crore demand on an NRI over a ₹1.5 crore deposit held jointly with his father, so the bank papers can be examined.
- Since 1 November 2025, bank depositors can name up to four nominees.
What happened in the Mumbai tribunal case?
The case, first reported by The Financial Express on 30 October 2026 and detailed by VisaVerge on 1 November, concerns a tribunal order dated 30 April 2026 (ITA 1771/MUM/2026) on a ₹1.5 crore fixed deposit held by an NRI jointly with his father, who was also a non-resident.
For assessment year 2019-20, the Income Tax Department reopened the son's assessment after receiving information through its Insight portal. No bank records were filed during the reassessment, and the bank did not reply to the department's notices. The officer treated the whole ₹1.5 crore as the son's unexplained investment under section 69. The Dispute Resolution Panel upheld the addition, and the final assessment order of 10 December 2025 led to a tax demand of about ₹2.59 crore.
Before the tribunal, the son argued that his father had funded the deposit from an NRE account, that the father was the first holder, and that a joint name does not show who supplied the money. On 30 April 2026 the tribunal sent the case back to the assessing officer to examine two documents: a statement showing the source of the deposit and a bank certificate naming the father as first holder. It did not cancel the addition or decide who owned the deposit. The case is still open.
Who pays tax on a joint fixed deposit?
The general principle is that the person who contributed the money is the beneficial owner of the deposit and is taxed on the interest, whatever the order of names. If a father funds the whole deposit and adds his son for convenience, the interest is the father's income. If two people each put in half, with proof, each is taxed on half.
The practical problem is reporting. Banks usually deduct TDS on a joint deposit under the first holder's PAN, as TaxGuru explains. Large deposits are also reported to the tax department. If the reports point to one person and the money came from another, the tax department may ask questions, and the answer has to be on paper.
Can an NRI hold a joint account with a parent in India?
Yes. The RBI's FAQs on non-resident accounts allow both NRE and NRO accounts to be held jointly with a resident relative on a 'former or survivor' basis. In simple terms, the NRI is the main holder, and the resident relative can take over the account if the NRI dies.
| Account | Joint with a resident relative? | Indian tax on interest | Taking money abroad |
|---|---|---|---|
| NRE (rupees, from foreign income) | Yes, 'former or survivor' | Exempt for NRIs | Freely repatriable |
| NRO (rupees, Indian income) | Yes, 'former or survivor' | Taxable, TDS deducted | Up to USD 1 million a financial year |
The NRE exemption is confirmed in the Income Tax Department's non-resident FAQ: it was in section 10(4)(ii) of the 1961 Act and has been kept in the Income-tax Act 2025. On NRO interest, banks deduct TDS at 30% plus surcharge and cess, and a lower treaty rate can apply with a tax residency certificate, Form 10F and PAN, as Kotak Mahindra Bank sets out.
What if the parent funds a deposit in the NRI child's name?
A gift of money from a parent to a child is not taxed in India in the child's hands, because parents are 'relatives' under the gift rules. But the gift needs to be shown. A short gift letter, the bank statement showing the transfer, and the deposit receipt together tell the story. Without them, a deposit in the child's name can look like the child's own unexplained money, which is the risk the Mumbai case shows.
The opposite flow matters too. An NRI who sends money to a parent to invest in a joint deposit should keep the remittance advice and the NRE or foreign account statement. That trail shows the money is the NRI's own, earned abroad.
What papers should a family keep for a joint deposit?
- Source of funds. The bank statement of the account the money came from, such as an NRE account, a salary account or a sale of property.
- Who is first holder. The deposit advice or a bank certificate showing the order of names.
- Gift letters. Where one family member funds a deposit for another, a dated letter signed by both.
- Tax returns. The interest should appear in the return of the person who owns the money, with TDS credit claimed correctly.
- Your AIS. Check the Annual Information Statement on the e-filing portal each year for deposits and interest reported under your PAN, and give feedback if something is not yours.
- Nominees. Since 1 November 2025, depositors can name up to four nominees, together or in order, under the Banking Laws (Amendment) Act 2025, as summarised by Taxmann. A nominee generally receives the money on behalf of the legal heirs; nomination does not replace a will.
What should you do if you get a notice about a joint deposit?
Reply within the time given, and reply with documents. In the Mumbai case, no bank records were filed at the reassessment stage, and the bank did not answer the department's notices. Years later, the family is still arguing over a deposit the son says was never his. Ask your bank early for a source statement and a first-holder certificate, because older records can take time to obtain.
When someone in the family moves abroad, it is also worth reviewing every joint account and deposit: which ones should become NRO accounts, who funded what, and whose return the interest belongs in. This is where advice on both FEMA and tax pays for itself.
This article is general information, not advice on your situation. Rules may change; outcomes depend on your facts. Team Greenwolf.
Author – Team Greenwolf
02 November, 2026 | 6 min read
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