Question: I am working in Saudi Arabia since aug 14, am I considered as NRI and do I need to pay tax. I applied for NRE account in ICICI bank and application was processed later I was told by officer that I dont require NRE account since I am not taking money back to Saudi, Also he mentioned that there is no tax on money transferred from Saudi only interest is taxable.

Please guide me.

Answer: 
For the financial year 1 April 2014 to 31 March 2015 as you have / will be spending more than 182 days outside of India, you are Non-Resident from tax point of view.

For the period 1 April 2014 to Aug 2014, any salary / income you have earned in India is taxable and tax need to be paid.

For the period Aug 2014 to 31 March 2015 the income you have earned in Saudi is not taxable in India. You can transfer money to India or keep in Saudi, it has no effect on the taxes. Any interest income you earn, or rental income you earn, or any other source of income in India is taxable.

You would need to file returns accordingly.

An NRE Accounts allows you to transfer funds out of India without any questions. So if you intend at some point in time in future to move funds out of India [say settling down in Saudi or UK or US etc] it is advisable to have NRE account. If you are sure you don't want to transfer funds out of India, you should open an NRO account.
In addition to above points :

Interest earned on NRE accounts are tax free. But you can deposit any foreign currency except INR. Nothing is taxable.

While the NRO account gives you a flexibility to deposit INR too, the interest will be taxable and tax will be deducted at source at the rate of 30.9%.

It is necessary to convert the existing Indian local accounts to NRO as per the Reserve Bank of India circular: RBI/2007-2008/242 Master Circular No. 03 /2007- 08 .

So basically you need:

* NRE Account : When you want to transfer money to India, keep your money liquid and earn on tax free FDs
* NRO Account : When you deposit rent or income from any other source in INR, but credit balances are subject to respective income tax bracket