Many Non-Resident Indians (NRIs) earn or receive money in foreign currency but need Indian Rupees (INR) to save or spend the funds in India. Having a normal bank account doesn’t fulfil this requirement. Thus, you need to open a special account known as an NRE Account that allows you to seamlessly conduct foreign currency transactions, as well as convert foreign currency into INR. So, let’s begin with NRE Account meaning.
What is an NRE Account?
Wondering what is the full form of NRE Account? NRE Account refers to Non-Resident External Account. It allows Non-Resident Indians (NRIs) to store their foreign currency in Indian banks. If you have an NRE Account, you can seamlessly deposit money in foreign currency and withdraw it in Indian Rupees. If you are thinking who can open NRE Account, then all the NRIs are permitted to open an NRE Account.
NRE Account benefits
Now that it is clear what does NRE Account mean, let’s check out some of the key NRE Account benefits:
- Quick withdrawals: NRE Accounts allow you to seamlessly receive your foreign income and convert it into Indian currency. You can easily repatriate such income to India in a tax-efficient manner. You can open an NRE Account in the form of a Current Account, Savings Account or even a Fixed Deposit Account.
- Joint account: You can open an NRE Account jointly with another NRI. However, a joint account with an Indian resident is not permitted except on the basis of 'former' or 'survivor'.
- Tax exemptions: This is one of the biggest benefits of having an NRE Account. The interest earned on NRE Account funds is exempted from tax in India.
- Seamless transferability: You can seamlessly transfer the principal and interest portion of your funds back to your country’s bank account outside India. This facilitates frequent transfer of funds to and from the NRE Account to a foreign account.
How is an NRE Account different from an NRO Account?
You might be thinking what is NRO Account, right? NRO Account, also known as Non-Resident Ordinary Account, allows NRIs to manage income earned in India. NRE Account rules are a bit different from NRO Accounts. Following are the key points of difference based on NRE and NRO Account RBI guidelines:
- Repatriation: NRE Account allows seamless repatriation of principal and interest into and outside India. In the case of an NRO Account, while interest can be repatriated seamlessly, the principal can be repatriated within set limits.
- Tax treatment: Interest on the NRE Account is tax-free, whereas interest on the NRO Account is taxable.
- Joint account holding: An NRE Account can be opened only by two NRIs, whereas an NRO Account can be opened by two NRIs or an NRI and an Indian resident.
How is an NRE Account similar to an NRO Account?
- Deposits and withdrawals: NRE Accounts allow deposits in foreign currency and withdrawals in Indian currency. NRO Accounts allow the same, except that they also allow deposits in Indian currency.
- Transfer of funds: Both accounts are meant for seamless transfer of funds internationally.
- Effect of exchange rate fluctuations: The exchange rate fluctuations affect the fund transfer from both NRE and NRO Accounts.
The right banking partner
To enjoy a seamless transfer of funds and enjoy a great banking experience, it is important to select the right banking partner. Axis Bank has been the preferred banking partner for NRIs to park their income earned overseas. Axis Bank provides multiple NRE Account options to allow you to choose the one that best suits your needs and preferences. Each account is bundled with a lot of benefits and features like complimentary airport lounge, movie tickets, discounts, etc. Open your NRE Account with Axis Bank now!
Also Read: Which bank account should you open as an NRI?
FAQs
Who can open an NRE Account?
Non-Resident Indians who earn or receive money in foreign currency and withdraw in Indian currency can open an NRE Account.
Can we open both NRE and NRO Accounts?
Yes. Depending on your transaction requirement, you can open both an NRE Account and an NRO Account.
What are the tax implications on NRE Accounts?
The interest earned on NRE Accounts is exempted from tax in India. This makes NRE Accounts one of the most tax-efficient accounts for NRIs.
What is the difference between NRO and NRE Accounts?
The NRE Account is used to store foreign currency in Indian currency, whereas the NRO Account allows you to store money in both foreign and Indian currency.
What is the taxable limit of the NRO Account?
The earnings received from the NRO Account are taxable at the rate of 30%, plus applicable surcharge and cess.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
