What is Non Resident External or NRE
Resident External Account or commonly known as NRE Accounts are Rupee
denominated accounts which can
be opened only by NRIs. NRE accounts can be opened as Savings Account,
Current Account, Recurring Deposit Accounts or Fixed Deposits Accounts.
- Income earned abroad can be deposited for investments
- Interest earned is fully tax free
- Funds are freely repatriable
Account in Joint Names
- NRE accounts can be opened in joint name with any
accounts can not be opened in joint names with residents. However NRI
may be permitted to open NRE account with resident close relative on former
or survivor basis.
a situation where the NRE account is held by two or more NRIs in joint
names, and later any of them loses his status of being NRI (ie. he
becomes a resident), the NRE account shall be either renamed as a
resident account or the name of the resident account holder be deleted
as per choice of the account holders.
Funds of NRE accounts are
of NRE accounts along with interest is permitted to be repatriated
outside India any time without approval of Reserve Bank of India.
Interest is Tax Exempt
per Section 10 (4)(ii) of the Income Tax Act interest earned on NRE
accounts as well as interest earned on NRE Fixed Deposits are fully
income tax. Thus keeping money in NRE accounts does not bring any tax
burden on the account holder.
However once the account holder loses his residential status of NRI,
interest earned would become taxable. As per RBI directions, NRE
Account should immediately be designated to a Resident Account or funds
of NRE account should be transferred to a RFC (Resident Foreign
Currency) Account at the option of account holder.
held in NRE accounts can be freely transferred to FCNR account of the
same account holder, similarly money from FCNR account can also be
freely transferred to NRE account of the same account holder.
- NRE Accounts should be immediately converted to
Resident accounts on change in residential status from Non Resident to
- Indian incomes like rent, interest etc. can not be
deposited to NRE account. For such Incomes one needs to have an NRO
- Loans are permissible against NRE deposits.