Everything You Need To Know About NRE Account

One of the most important considerations for a person when he moves abroad is what to do with his funds in India. As per Foreign Exchange Management Act (FEMA), a person who becomes a non resident cannot have a savings account in his name. However, the existing savings account can be converted into a Non Resident External (NRE) or a Non Resident Ordinary (NRO) account.

An NRE account is an Indian Rupee account but the deposits in this account have to be made out of repatriable foreign currency from abroad. Each bank has a list of currencies that it accepts in terms of deposits. The foreign currency deposited by the account holder is converted by the bank into Indian Rupees at the current exchange rates.

You’re free to open an NRE current account, savings account or a fixed deposit account. The interest earned on an NRE account is nominal. However, the interest is not subject to tax in India since the earnings are considered to be foreign earnings.

Here are some features of an NRE account:

1. Funds from an NRE account can be transferred to another NRE account. They can also be transferred to an NRO account for investment in India. However, once the funds are transferred to an NRO account, they cannot be repatriated unless the terms and conditions are fulfilled.
2. Funds to the credit of an NRE account can freely be repatriated abroad. The rupees will be converted into foreign exchange when the repatriation has to be done. There are no limits on the repatriation that can be done from this account.
3. This account can be opened jointly with a resident Indian or a non resident such as Person of Indian Origin (PIO), Overseas Citizen of India (OCI) or a Non Resident of India (NRI).
4. These accounts can be zero balance accounts where funds can be remitted in the future.
5. The minimum term for an NRE fixed deposit is 12 months and the maximum can range from 7 to 10 years.
6. The funds in an NRE account can be used by the non resident to make investments in the stock market. However, the NRI must fulfil any other compliance requirements for investing.
7. Best NRE account are equipped with standard saving account tools such as NetBanking and Mobile Banking. This allows the NRI to operate the account from any geographical location.
8. Banks give a mandate card with this account which makes it possible for the relatives of the NRI to operate the account. A cheque book facility is also provided.
9. If you open an NRE fixed deposit, it is possible to get a loan against the FD balance as well. If you open an NRE account fixed deposit, it auto renews the principal and interest unless you give instructions otherwise.

An NRE account makes it very easy for a non resident to manage their external earnings in India.