There are NRIs who earn income not only in the country they reside but also in India. They often find it difficult to manage their finances, tracking accounts in a different country and to repatriate money to their home account. It is necessary for an NRI to have an account in India where they can deposit all their foreign currency savings. In such a case, a Non-Resident External (NRE) account is an ideal choice. NRIs can open an NRE account with commercial banks in India. An NRE account can be in the form of fixed, current, savings and recurring deposits. All funds that come to an NRE account, no matter what currency they are in, are converted to INR. It is to be noted that the income which is earned outside India can only be deposited in the NRE account.
Benefits of applying for an NRE account
Before applying for an NRE account, an NRI must be aware of the advantages of owning such an account. Given below are a few benefits that an NRI needs to know –
The purpose of an NRE account is to allow you to transfer funds earned overseas to India and maintain them. Their income from India (in the form of assets) can be retained in the home country itself. Having an NRE account will become convenient for you to use your foreign earnings in India. Since it is an Indian Rupee Dominated account, it provides complete safety. An NRE account becomes useful when NRI’s need to meet financial emergencies of their family members back home, such as investing for retirement, household expenses, fees of child’s higher education, medical emergencies, etc.
Under the NRE account, the income earned by an NRI is tax-free (no wealth tax, income tax or gift tax). Since both the interest and principal amount earned in an NRE account is exempted from tax, it can be a great way to invest your earnings and earn returns in assets such as stocks and fixed deposits.
Fully and freely repatriable funds
The inflow/outflow of currency between India and a foreign country is known as repatriation. A smooth flow of funds is promoted by an NRE savings account as NRE account holders get the benefit of free repatriation for both the principal and the interest amount. Funds (both principal amount and interest) can be transferred to a foreign account without any complications and risks.
A joint NRE account can also be held if both the account holders are NRI’s. The joint account must be between an NRI and his or her resident relative (siblings, parents, grandparents, etc.). A joint account will give the advantage of facilitating payments in India by the resident account holder.
If you want to save your earnings in foreign currency, you also have the option of Foreign Currency Deposits to earn interest in any of the currencies across the world. Tax-free interest is earned on an FCNR (Foreign Currency Non-Repatriable) account deposit.
An NRE account is generally used for making investments, carrying out businesses and personal banking in India. You will not be required to maintain high balances in an NRE account, opening of which is convenient and easy. Nowadays, banks demand from the accountholders to have a minimum balance of Rs. 10,000. Opening an NRE account is a good idea when you intend to transfer foreign income to India while avoiding taxation liabilities. It offers a secure and suitable solution to manage funds across the globe.