NRE Accounts in detail

As per the Foreign Exchange Management Act (FEMA) guidelines, an NRI cannot have a savings account in his or her name in India. He has to convert all his savings to a Non- Resident External Account which will enable him to send his foreign earnings to India at any point & also retain his income from India (via any assets) in the home country itself.

A Non-Resident External (NRE) account is a rupee dominated account opened by an NRI to facilitate deposit of foreign currency earnings & is primarily used for carrying out business, personal banking and making investments in India.

FEATURES OF NRE ACCOUNT

The main features of NRE account are listed below –

  • The account should be opened by the Non Resident account holder himself & not by the holder of power of attorney in India.
  • Two or more Non-Resident Indians can open a joint NRE account as long as all account holders are persons of Indian origin or nationality.
  • These accounts can be in the form of savings, current, recurring, or fixed deposits & the foreign currency deposited to this account is converted to INR.
  • The minimum period for term deposits is 12 months and the maximum period is 10 years.

BENEFITS OF NRE ACCOUNT

The NRE account has the following benefits to the account holders –

  1. NRE accounts are exempt from tax. This means that both, the principal amount and the interest earned is free from tax.
  2. Funds held in this account including interest earned thereon are fully repairable.
  3. NRE Accounts can be used for personal purposes or for carrying on business activities in India. NRE Accounts are primarily used for making direct investment in India.
  4. Nomination Facility is also available for NRE accounts.
  5. NRE account is powered by internet banking to give 24×7 banking convenience to customers.

DRAWBACKS OF NRE ACCOUNT

NRE accounts are subject to conversion loss and fluctuation in the value of rupee against a foreign currency . Hence , these accounts do not offer any protection against currency fluctuations, which are very volatile and prone to change on a daily basis.

 

Thus, in simple words an NRE (Non-Resident External) Account is an account exclusively for Non-Resident Indians which enables them to park and manage their foreign earnings in India, denominated in INR .

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