Unlocking NRI banking: Key NRE account rules and tips

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Summary – Explore the essential guide to NRE account rules for NRIs. Understand eligibility criteria and benefits and know when an account qualifies for NRI banking in India. Discover the right way to open an NRE account, the documentation, etc.

Imagine you are an NRI (Non-Resident Indian), eager to invest your hard-earned money back home in India. You might know about NRE (Non-Resident External) accounts, but are they the right choice for you?

Before anything else, first, understand what an NRE account is and when an account qualifies for the same.

Discover NRE account rules, the documents required to open an NRE account, and who can open one to simplify your finances.

What is an NRE account?

An NRE account is a savings account designed specifically for NRIs. The NRE accounts are for the customers to deposit their earnings earned outside India. It is denominated in Indian Rupees (INR), meaning that the funds you deposit in this account are maintained in INR, regardless of the currency you deposited.

The Reserve Bank of India (RBI) governs these accounts, and they offer several advantages to NRIs, . NRE account can be held jointly with another NRI or a resident relative on former or survivor basis.

If an NRI returns to India and becomes a resident, their NRE savings account is converted into a regular resident savings account.

Eligibility criteria to open an NRE account

To open an NRE savings account, you must meet one of the following eligibility criteria –

• Non-Resident Indian (NRI) – You must be an NRI who is residing outside the country for employment, education, business or other purposes.
• Mariners or seafarers – If you are working as mariners, seafarers, or employees of foreign airlines.
• Person of Indian Origin (PIO) – refers to a foreign citizen who held an Indian Passport at any point in time or whose parents/grandparents/great grandparents were citizens of India.
• Overseas Citizen of India (OCI) – form of permanent residency available to people of Indian origin and their spouses which allows them to live and work in India indefinitely​

NRE account rules and benefits

There are certain essential NRE account rules and benefits that you should be aware of –

• Fully repatriable – The funds within the account are entirely repatriable, allowing effortless movement of money from India to other foreign accounts.
• Tax-exempt interest – The interest earned on funds within the NRE account remains exempt in India. Taxation is governed by the account holder’s country of residence rules.
• Denominated in Indian rupees – The NRE savings account is maintained in INR, primarily intended for crediting funds transferred from overseas accounts.
• Joint NRI ownership – NRIs can jointly hold NRE accounts, offering a convenient option for collaborative financial management.
• International debit card access – With an international debit card, account holders can withdraw funds from their NRE accounts at their convenience.

Why do you need to open an NRE Account?

According to the Foreign Exchange Management Act (FEMA) guidelines, NRIs cannot have regular savings accounts in India to deposit their foreign income. Hence, they must open an NRE account to conduct transactions here.

This account allows you to deposit your earnings made outside India in Indian rupees. Moreover, it enables you to freely repatriate all your money back to your country of residence, which would not be possible without this account.

An NRE account allows NRIs to invest in India. It provides easy access to funds for your authorised family members here, making it a suitable option if you want to support your family back home.

Limitations of NRE accounts

As per NRE account rules, there are several benefits, but these accounts also have some limitations you should be aware of –

• Cannot deposit earnings from India – The primary limitation of NRE accounts is that they cannot be used to deposit earnings made by an NRI within India. For this purpose, NRIs must open an NRO (Non-Resident Ordinary) account.
• Funds converted to INR – When depositing funds into an NRE account, they will be converted to Indian Rupees, regardless of the currency. For retaining earnings in foreign currency, it’s recommended to opt for an FCNR account.

Documents required for NRE account

Here are the following documents required to open an NRE account –

• Identity proof – Passport
• Non-Resident Status Proof (any one of the following) – As per the guidelines, you can submit a Visa/PIO card/resident permit/Resident Card/Continuous Discharge Certificate with a valid contract letter for seafarers/foreign passport with PIO declaration.
• Overseas address proof (one of the following documents) – Passport, driving license, Government-issued IDs, voter ID/electoral card, latest utility bill, council tax bill, latest savings bank statement from a transactional account, resident permit, employment/university letter stating that the accommodation has been provided by the company/university
• Tax-related – PAN/Form 60, FATCA-related fields on the application form.
• Other documents – recent colour photograph, the image of your signature (only for online applications).

Seamlessly managing finances with NRE accounts

Park your overseas earnings in an NRE account and enjoy the countless benefits it offers. Not only is the interest earned tax-exempt, but a few banks, such as IDFC FIRST Bank NRE Savings Account, also provide you with the flexibility of moving funds between India and overseas effortlessly.

Opening an account is a breeze, whether in India or overseas. Plus, get a feature-rich Visa Signature Debit Card with multiple benefits, completely free.

Don’t miss out on this exclusive opportunity to make the most of your overseas earnings!

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Disclaimer: The information provided in this article is for informational purposes only and is not intended as legal or financial advice. The content has been sourced from various references and might be subject to changes over time. Readers are advised to consult with their financial or legal adviser before making any financial decisions. The website www.taxguru.in and the author of this post do not take any responsibility for the accuracy, completeness, or relevance of the information presented herein. This is a promotional feature (#AD) and should be used at the reader’s discretion.