If as a Canadian resident, I hold an NRE account with an Indian bank and i transfer money earned in CAD to this account. The I earn interest in rupees and want to transfer back to CAD. The interest is tax free in India for NRE account, but when I convert them to CAD to use in Canada, do I pay tax to CRA? Assumption is that I already paid tax on the original CAD which i transferred to india
Modified version of now-deleted comment
Chris Rea points out that Canada taxes world-wide income (as does the US). Thus, you should be reporting the interest earned each year on your annual tax return and paying taxes on that. When you convert these monies from INR to CAD for the purpose of bringing them back to Canada is irrelevant as far as the taxation of the interest is concerned, that is, you do not pay tax at the time of conversion, you pay the tax when the tax return for the year in which the interest was earned is filed. If you have not been reporting the interest earned in your NRE account on your tax returns, I recommend filing amended returns for the years that you missed. In the US, the laws regarding both the reporting of interest and dividend income earned abroad as well as the laws regarding reporting of assets held outside the US were honored more in the breach than in the observance by many, and especially so by persons of Indian origin. A couple of years ago, the IRS cracked down on this and the howls of outrage in the Indian community at having to comply with the laws were interesting to observe.
When you actually do convert the money in your NRE account from INR to CAD (whether original deposit or interest earned) you may have a loss due to the recent fall of the Indian Rupee, that is, if you close the account and convert all the money from INR to CAD, you may get back less than the original deposit plus all the earned interest on which you have been so diligently paying taxes. How that loss is handled on your tax return, or if it is regarded as a personal loss and thus non-deductible, is a separate issue.