As an NRI, you may not be clear on the various benefits of the accounts that are available to you in India. For NRIs, it is essential that you open an account to manage your income and investment to avail numerous benefits in India.
The accounts that are to be opened by NRIs are known as Non-Resident External (NRE) Accounts. They can be opened in the form of savings account, current account, recurring or fixed deposit account. Their major function is to transfer and maintain funds in INR and transfer it back to your home country whenever you want to. Furthermore, you can open a joint NRE account, but you can only open it with another NRI.
However, the exchange rate of NRE accounts should be kept in mind. The value of money deposited from a date may vary in the value depending on the exchange rate of withdrawal and vice versa. This is because the NRE accounts do not offer any protection towards exchange rate fluctuations, which are volatile on a daily basis.
The income generated from the interest rate on the balance held in an NRE account is to be exempted from the Income Tax of India. Similarly, balance sheets held in the NRE accounts are exempt from wealth tax.
Here are the 5 features of NRE accounts you should know before applying:
- Minimum balance requirement: There is no high balance requirement for the NRE accounts, considering the current situation, many banks have dropped the limit of balance significantly. It requires a minimum of INR 10,000.00 at the account level or INR 25,000.00 at the customer ID level as a balance for your NRE account nowadays. If you are unable to maintain the minimum balance service charges are levied at saving account level.
- Foreign Currency Non-Resident (FCNR) Deposits: You also have an option to book Foreign Currency Deposits for your NRE saving accounts, as well as NRE, fixed deposits. If you want to save your foreign currency earnings then you can book the FCNR deposit and earn foreign currency interest. There is a tax exemption on the interest earned on FCNR deposits.
- Taxation: Knowledge of interest rate taxation will help you select the correct Fixed Deposit NRI. While interest earned on both NRE saving and NRE fixed deposits is tax exempted in India, the savings in NRO saving account as well as NRO Fixed deposits are subject to TDS according to the Indian Tax regulations. You can transfer your funds from NRO account to NRE account post paying the applicable taxes.
- Repatriation benefits: One of the most important advantages of an NRI account is its Repatriation benefits. You can repatriate both NRE, as well as NRO savings account, as it allows a smooth movement of funds – principal and interest abroad. Funds are fully and freely repatriable in NRE accounts.
- Convenience: The NRE accounts are known for their convenience. The steps to open the NRE accounts are very easy. You do not need to visit the banks in India for most of the cases. There is an online procedure that needs to be followed, which includes filling a form, taking its print out, self-attesting it, and couriering it to the respective branch in India. You can use the NRE accounts for personal as well as business purposes in India. These accounts are primarily used to make foreign investments in India.
The following list of documents are required to open an NRE account:
- Recent passport size photographs
- Copy of Indian PAN card and Aadhar card or form 60
- Address proof of Overseas and Indian addresses
- The visa copy of your passport, or work permit, or NRI status copy
- A valid copy of your passport with pages of your name, address, photograph, expiry details, signature, date of birth, date, and place of issue; any observations other than these
- A copy of the document confirming your address overseas or Indian permanent address. The address shall be the same as mentioned in the application form
- A minimum balance paycheck or draft (DD slip is mandatory for Draft) from your own account to maintain the monthly average minimum balance in the account
- Your documentation and photographs can be attested by the Indian embassy or consulate in your country or a notary stamp or a banker overseas
The above-mentioned documents can then be forwarded to the respective bank for the account opening processes.
