Article

NRE Account for NRIs
August 24 , 2012

Non Resident External account or the NRE account is a type of bank account held by NRIs. Such an account can be opened with most Indian banks. This account is denominated in Indian Rupees and is repatriable. Features of NRE account are detailed below.

Repatriation from NRE account

Funds in NRE account are freely repatriable. Repatriation means that this money can be converted to foreign currency and taken abroad whenever the NRI desires. Repatriation of funds is allowed only through normal banking activities.

Because of repatriation benefit, NRIs converting foreign earnings to Rupees generally prefer to hold them in NRE accounts. But if such a person loses his NRI status and becomes a resident again, such accounts will have to be redesignated o ordinary savings accounts.

Source of funds in NRE account

The NRE account can only be replenished by money earned outside India, or returns on such money. Money originating from your assets in India or any sources in India cannot be credited in NRE account. This is because income tax needs to be paid on income generated in India whereas NRE account is tax free. NRE account can be savings, current or term deposit account.

You can remit money in any currency from abroad to an NRE account as well as transfer amount from an NRO/FCNR (B)/NRE account to this account. For crediting amounts in excess of $ 5000 (or equivalent) in currency or $ 10,000 (or equivalent) in Travelers Cheques they should be accompanied by a Currency Declaration Form. Interest, dividend, maturity proceeds of investments made in India on repatriable basis can be credited to NRE account.

Taxation in NRE account

Funds in NRE account are completely tax free. Interest on balances is free of income tax and the balances themselves are free of wealth tax.

Interest in NRE account

According to present RBI rules balances in NRE account cannot earn interest higher than deposits in domestic accounts. Though interest rate in NRE account is sometimes lower than NRO account the yield is higher in NRE account due to tax free status.

Nomination, joint account, loan facility in NRE account

NRE account has nomination facility. However if funds have to be repatriated to nominees then application has to be made in prescribed form. Credits to nominees will also require permission from RBI.

NRE account cannot be operated jointly with a resident. A close relative who is a resident can be a joint holder in NRE account on 'former or survivor' basis but operate it only as Power of Attorney (PoA). Such a PoA can withdraw funds only for local payments. A joint account can be held with an NRI without these restrictions.

Rupee loan can be availed against NRE fixed deposit or recurring deposit.

Documents for opening NRE account

You need to submit completed application form signed and attested by your banker/Embassy of India/public notary or any person known to the bank and be accompanied by

- Copy of passport

- Copy of Visa

- Latest Overseas bank statement in original, latest overseas telephone/electricity bill in original as residential proof

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