A Fool’s Guide To NRE & NRO account in India

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An NRE account, also known as a Non-Resident External account, is a type of bank account that can be opened by Indian citizens who are living abroad. The account can be used to maintain and manage foreign income in India, and the funds in the account can be freely repatriated, which means that they can be transferred back to the account holder’s country of residence.


NRE accounts can be held in Indian rupees, and the funds deposited in the account are fully convertible. This means that the funds can be easily converted into any foreign currency and transferred to a foreign bank account. NRE accounts can be held as savings, current, or fixed deposit accounts.

The interest earned on NRE accounts is tax-free in India, which makes them an attractive investment option for Non-Resident Indians (NRIs). However, the account holder may be required to pay taxes on the interest earned in their country of residence, based on the tax laws of that country.

NRE Account: An Overview

An NRE account is a type of bank account that Non-Resident Indians (NRIs) can open with an authorized bank in India. It is an acronym for Non-Resident External Account. The account can be held in the form of savings, current, or fixed deposit accounts, and is denominated in Indian Rupees (INR). This article provides a detailed overview of the NRE account, including its eligibility criteria, advantages, and other important aspects.

Eligibility Criteria

To open an NRE account, the account holder must be an NRI or a Person of Indian Origin (PIO) residing outside India. Additionally, the account holder must be at least 18 years old and should have a valid passport and visa. NRIs can open an NRE account jointly with another NRI or with a resident Indian who is a close relative.

Advantages of an NRE Account

There are several advantages to opening an NRE account, including:

  • Tax-Free Income: Interest earned on an NRE account is tax-free in India. This means that the account holder does not have to pay any tax on the interest earned from the account.
  • Currency Risk: An NRE account allows NRIs to keep their money in Indian Rupees, thereby reducing currency risk. If the NRI were to keep their money in a foreign currency, they would be exposed to fluctuations in the exchange rate.
  • Easy Repatriation: Funds held in an NRE account can be easily repatriated to the NRI’s country of residence without any restrictions. The account holder can transfer funds from their NRE account to their foreign account or to another NRE account.
  • Joint Account: NRIs can open an NRE account jointly with another NRI or with a resident Indian who is a close relative. This makes it easier for NRIs to manage their finances in India.
  • No Minimum Balance Requirement: There is no minimum balance requirement for an NRE account. This means that the account holder can maintain a zero balance in their account.
  • No TCS is charged to NRE. As per the Indian Income Tax Act, TCS is not applicable to money remitted by NRIs from their NRO account to NRE/ foreign account. Hence, NRIs can easily remit their Indian earnings, like pension, dividend, salary, rent, investment, profits from businesses permitted for repatriation, distribution from any type of deposits, etc.

Which are the three types of NRE accounts?

There exist three main types of NRI accounts:

  • Non-Resident External (NRE) Account.
  • Non-Resident Ordinary (NRO) Account.
  • Foreign Currency Non-Resident (FCNR) Account.

What is an NRE account?

An NRE Account or Non-Resident External Account offers you this facility. Here, your money is converted into Indian Rupee or INR at the time of deposit. This means that you can deposit money in any foreign denomination, e.g. US Dollar, and withdraw it in Indian Rupees.

Which is better NRE or NRO?

You should opt for NRE Accounts if you want to hold or maintain your overseas earnings in Indian currency. NRE Accounts are also suitable if you wish to keep your savings liquid. You should opt for NRO Accounts if you want to save your earnings from India in Indian currency itself.

What is the advantage of NRE over NRO?

These incomes include rent, dividends, pensions, interest, etc. NRE accounts are exempt from tax. Neither the balance nor the interest earned on these accounts is taxable. The interest earned on an NRO account is however taxable at 30% according to the Income Tax Act 1961.

Is TCS applicable to NRI ?

Under Section 206C(1G), TCS is NOT applicable on money remitted by NRIs from their NRO account to NRE/ foreign account. Hence, NRIs can easily remit their Indian earnings, like pension, dividend, salary, rent, investment, profits from businesses permitted for repatriation, distribution from any type of deposits, etc.

What is a 1 million dollar scheme in India?

A Non-Resident Indian (NRI) or a Person of Indian Origin (PIO) may remit an amount up to USD one million, per financial year, out of the balances held in his Non-Resident(Ordinary) Rupee(NRO) account/sale proceeds of assets (inclusive of assets acquired by way of inheritance of settlement), for all bonafide purposes. We have a detailed PDF Guide for you. Click to download One million dollar scheme in India Guide

What are the disadvantages of NRE account?

  • You can’t deposit INR funds in an NRE account (there is an exception where you can deposit funds from your NRO to NRE).
  • Foreign currencies deposited in an NRE account are subject to conversion into Indian rupees, sometimes incurring losses during repatriation.

Is the NRE Account operable by a mandate?

  • Yes, the operation of an account through a Power of Attorney (POA) holder is allowed.
  • A POA holder can only issue INR cheques from NRE / NRO accounts for legitimate local payments.
  • A POA holder cannot Open / close accounts Gift funds from the account Give instructions regarding fixed deposits Give a request for a change of address Repatriate any funds overseas
  • What is the disadvantage of NRO?

Interest earned on balances in NRO Accounts is not exempted from Indian Income tax. Instead, income tax is deducted at source (TDS) i.e. at the time of payment of interest by the bank. Balance held in the NRO account can neither be repatriated.

Can I have both NRE and NRO?

Yes, an individual can open both NRE and NRO accounts to meet his needs. If you have any income arising in India, you can receive it in NRO account, and if you want to park your earnings abroad in India, you can open an NRE account.

Can I open an NRE account from abroad?

Yes. An NRI Can also open accounts from abroad by sending duly filled and signed AOF duly attested by the Indian Consulate along with attested copies of passports and visas, etc.

Can I withdraw money from NRE account outside India?

A Non-Resident External (NRE) account helps an NRI store their foreign currency savings in an Indian bank. Using an NRE account, an account holder can deposit money in any foreign denomination and withdraw it in INR (Indian Rupees).

Who Cannot open an NRE account?

An NRE account/s can be jointly opened with any other NRIs but not with any other resident. Moreover, a person of Pakistani or Bangladeshi citizenship cannot open an NRE account. Money between various NRE accounts can be freely transferred without any limit.

Can I transfer money from my NRE account to abroad?

The NRE funds can be repatriated only to customers’ own/self-account abroad. The beneficiary’s name should be the same as per the name of the account holder. Repatriation of funds to a third party is not allowed under this option.

Can I transfer money from NRE to an Indian account?

YES! NRIs can transfer funds from their NRE (Non-Resident External) Account to their NRO (Non-Resident Ordinary) Account. An NRE account allows you to transfer funds to another NRE account as well as an NRE to NRO fund transfer.

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