Article explains about Non- Resident (External) Rupee Account Scheme – NRE Account and Non-Resident Ordinary Rupee Account Scheme – NRO Account.

Particulars

Non- Resident (External) Rupee Account Scheme – NRE Account

(Schedule – 1)

Non-Resident Ordinary Rupee Account Scheme – NRO Account

(Schedule – 3)

Eligibility

A. Non-resident Indians (NRIs),

B. Person of Indian Origin (PIOs)

C. Individuals/entities of Pakistan and Bangladesh shall require prior approval from RBI.

A. Person resident outside India

B. Individuals/entities of Pakistan and Bangladesh shall require prior approval from RBI.

C. Individuals of Bangladesh holding valid visa and valid residential permit issued by FRO/FRRO.

Types of Accounts

A. Savings account,

B. Current account,

C. Recurring Deposit account,

D. Fixed Deposit account (1-3* years).

*above 3 years is allowed from their asset-liability point of view.

A. Savings account,

B. Current account,

C. Recurring Deposit account,

D. Fixed Deposit account (As to a resident).

Purpose To transfer funds earned abroad. Manage the income earned in India.
Permissible Debit

A. Local payments,

B. Remittances abroad,

C. Transfer to other NRE/FCNR accounts of persons eligible to open such accounts,

D. Investment in movable/ immovable property in India permitted under FEMA,

E. Any other transaction covered under general or special permission granted by RBI.

A. Local payments,

B. Interest fully repatriable subject to tax,

C. Remittances of current income outside India subject to tax,

D. Transfer to NRO a/c of the account holder or other NRI

E. Investment in movable/ immovable property in India permitted under FEMA on non- repatriation basis,

F. Any other transaction covered under general or special permission granted by RBI.

Permissible Credit

A. Proceeds of inward remittances in any permitted currency,

B. Proceeds of Foreign Currency Notes/Travellers’ Cheques brought by the NRI account holder from abroad during his temporary visit to India, subject to conditions,

C. Proceeds from foreign currency/ tender currency deposited by NRI during his visit to India require a Currency Declaration Form (CDF),

D. Transfers from NRE/FCNR accounts of the account holder and Interest accruing on the funds held in these account.

E. Current income of NRIs like rent, dividend, pension, interest, subject to payment of income taxes.

F. Sale proceeds of immovable property purchased out of inward remittances, NRE/FCNR funds, the investment was made as per FEMA,

G. Refund of shares/debenture subscriptions to new issues of Indian companies or advance to property, together with interest, if any (net of income tax payable thereon), provided the original payment was made from NRE/FCNR account or forex remittance,

H. Any other credit covered under general or special permission granted by RBI.

A. Inward remittances to India in permitted currency,

B. Permitted currency tendered by the account holder during his temporary visit in I

C. Legitimate dues in India of the account holder like current income,

D. Transfer from other NRO accounts,

E. Any amount received by rules of FEMA.

Rate of Interest Banks are free to determine ROI.

However, it cannot be higher than the ROI offered in comparable domestic rupee deposit.

Banks are free to determine ROI.

However, it cannot be higher than the ROI offered in comparable domestic rupee deposit.

Repatriation Funds including interest can be easily repatriated. Not repatriable except for all current income.

USD up to 1 million per financial year along with their other eligible assets can be repatriated.

Deposit of Funds Foreign currency Foreign as well as the Indian currency
Withdrawal of Funds Indian currency Indian currency
Transfer Both the NRE/NRO account Only NRO account
Joint account Can be jointly held between 2 NRIs or an NRI and a close relative resident Indian. Can be jointly held between 2 NRIs or an NRI and a resident on former or survivor basis.
Taxability Balance and interest thereon is tax-free Balance and Interest are taxable.

Banks would deduct TDS of 30% on interest income.

Payment of funds to NR nominee Allowed if the account holder is deceased Allowed if the account holder is deceased
Overdraft OD up to a limit of  Rs.50,000/- is allowed, provided that OD along with interest should be repaid within 2 weeks OD is allowed, provided the repayment along with interest shall be repaid using inward remittance or out of legitimate dues.
Loan

A.  In India:

Loan against the deposit is granted to the account holder or a third party without any limit, subject to the usual margin requirements.

These loans cannot be repatriated outside India.

B. Outside India:

Loan against the deposit is granted to the account holder or a third party at the request of the depositor for bona fide purpose subject to usual marginal requirements

A. In India:

Loan against the deposit is granted to the account holder or a third party subject to usual norms and marginal requirements.

B. Outside India:

Not permitted

Operation of Power of Attorney in favour of a resident Restricted to withdrawals for permissible local payments or to the account holder himself through normal banking channels. Restricted to withdrawals for permissible local payments in rupees, remittance of current income to the account holder outside India or to the account holder himself through normal banking channels
Change in Residential status from Non-resident to resident The account could be designated as a resident account or the funds could be transferred to the RFC account. The account could be designated as a resident account.
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