20 June 2022 21:10

NRE Account and a Ordinary Saving Account

As per the Foreign Exchange Management Act (FEMA) guidelines, an NRI cannot have a savings account in his or her name in India. You must convert all your savings (money earned abroad) to a Non-Resident External Account (NRE) or Non-Resident Ordinary (NRO) account.

What is the difference between NRE account and savings account?

One of the major difference between an NRE and NRO Savings Account is the option each of them offer for deposit of funds. An NRE Savings Account will only allow you to deposit funds in a foreign currency while in an NRO Savings Account, you can also deposit funds in Indian Rupees.

Is NRE account a savings account?

An NRE (Non-Resident External) Account is a savings account maintained in ₹ where you invest your foreign income earned outside India.

Can I transfer money from normal savings account to NRE account?

You cannot transfer money to a NRE account from a savings account in India. However, you can transfer money from NRO to NRE account. You can also transfer money from one NRE account to another.

Is it mandatory to convert savings to NRE account?

The answer to that question is ‘no’. You can reside in one country and continue operating a bank account in India. You would be required to intimate the Bank of change in your residence, after which the bank will ask you to convert the account from INR to NRO/NRE/SNRR.

Can NRI have normal savings account in India?

As per the Foreign Exchange Management Act (FEMA) guidelines, an NRI cannot have a savings account in his or her name in India. You must convert all your savings (money earned abroad) to a Non-Resident External Account (NRE) or Non-Resident Ordinary (NRO) account.

Which is better NRI or NRE?

Though there are several differences between an NRE and NRI account, you will need both to manage your funds. An NRE account proves useful for your foreign earnings and you can even send money back to your country of residence freely. An NRI account helps keep your income earned in India safe and within India.

What is the purpose of NRE account?

A Non-Resident External (NRE) account is a rupee dominated account opened by an NRI to facilitate deposit of foreign currency earnings. The advantage of an NRE account is that it has high liquidity and allows for full repatriation of funds from the account to the NRI’s country of residence when required.

Can we withdraw cash from NRE account?

Non- resident External account is abbreviated as an NRE account. These are Indian rupee accounts opened by NRIs in India. The main purpose of these accounts is that they enable the account holder to deposit money in foreign currency. The account holder can withdraw money from his/her NRE account.

What is the benefit of NRE account?

Opening an NRE account will allow you to: Send your overseas funds to India and hold the funds in Indian Rupees. Freely repatriate funds without any restrictions. Easily invest money in Indian investment instruments.

What happens if I don’t convert my savings account to NRO account?

Penalty for not converting to NRO account

2 lakh (if the sum is not quantifiable) will be charged. Moreover, the account holder will be liable to pay a penalty of Rs. 5,000 every day from the first day of violation until the penalty is paid.

What is the penalty for an NRI trading in a regular resident account?

As per FEMA rules, the penalty for not converting resident account to an NRO account is up to 3 times the amount involved in it or Rs 2 lakh when the sum is not quantifiable. A daily penalty of Rs 5,000 will also be charged from the 1st day of intervention until the penalty is paid.

How long can NRE account be maintained?

If you fail to convert your NRE account within 3 months of the return, it will be considered as a violation of Foreign Exchange Management Act (FEMA) and attract a penalty.

How much money can I transfer to my NRE account?

Send as much money you want: The Foreign Exchange Management Act (FEMA) does not specify any limit on the amount of money you send to a NRE account. However, this income needs to be earned legally in your country of residence. If you are transferring very high amounts you may be asked to explain your source of funds.

Is there any tax on NRE account?

There is no tax applicable in India on funds lying in your NRE accounts. However, interest earned on NRO account is taxable at the rate of 30% plus applicable cess and surcharge. If the interest exceeds Rs. 5 million during the financial year then an additional surcharge of 10% would also be applicable.

Can you keep your NRE account after returning to India?

You cannot maintain your NRE account and NRE FDs when you are an RNOR. You need to convert your NRE account to resident account immediately upon returning to India. You need to convert these accounts to resident accounts within a reasonable period of time.

Is NRE FD tax free?

An NRE Fixed Deposit is exempt from taxation, but an NRO Fixed Deposit is liable for the NRI tax due. Interest earned on NRE Fixed Deposit is exempt from tax in India but there is TDS applicable on interest earned on NRO Fixed deposit.

Which is the best bank to open NRE account in India?

Best NRE Savings Account for NRIs in 2022

Name of the Bank NRE Deposit Interest rates below Rs. 2 crores
Kotak Mahindra Bank 4.60% 4.75%
RBL Bank 5.40% 6.10%
SBM Bank 6.50% 7.50%
State Bank of India 4.90% 5.30%

Can I have 2 NRE accounts?

No, NRIs can only open one PIS account. However, they can open multiple NRE savings bank accounts.

Is it mandatory to convert NRO to savings account?

1. It is mandatory: As per the Foreign Exchange Management Act (FEMA) guidelines, NRIs cannot hold resident FDs. They must convert it to an NRO deposit account. There is a penalty if you do not get the conversion done.

Can I issue Cheque from NRE account?

Yes, operation of account through a Power of Attorney (POA) holder is allowed. A POA holder can only issue INR cheques from NRE / NRO accounts for legitimate local payments.

Can a person have both NRE and NRO account?

Yes, an individual can open both NRE and NRO accounts to meet his needs. If you have any income arising in India, you can receive it in NRO account, and if you want to park your earnings abroad in India, you can open an NRE account.

Can debit card be issued to NRE account?

Whether Debit Card Facility is available to NRE account holders? – DEBIT-cum-ATM Card facility is available for NRE account holders. The same is provided, upon request.

Can I deposit cash in NRE account?

No, you cannot deposit INR cash in an NRE account because NRE accounts are used to maintain the income earned outside India.

Can I transfer money from NRE account to foreign bank?

Since an NRE account is exclusively meant for your foreign earnings, you can transfer the money back to your country of residence at any time. According to the RBI, the funds in this account are fully repatriable and without an upper transaction limit.