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What is Non Resident External or NRE Account?

NRE Accounts:

Non 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.

Key Features

  • Income earned abroad can be deposited for investments in India.

  • Interest earned is fully tax free
  • Funds are freely repatriable

Account in Joint Names

  • NRE accounts can be opened in joint name with any other NRI
  • NRE 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.
  • In 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 fully Repatriable.

Balance 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

As 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 exempt from 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.

Fund Transfer

Money 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.

Other Points

  • NRE Accounts should be immediately converted to Resident accounts on change in residential status from Non Resident to resident Indian.
  • Indian incomes like rent, interest etc. can not be deposited to NRE account. For such Incomes one needs to have an NRO account.
  • Loans are permissible against NRE deposits.

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