NRE ACCOUNT: ER. AVINASH KULKARNI

Saturday Brain Storming Thought (230) 06/07/2024

NRE ACCOUNT

NRE Account

NRE means Non-Resident (External) Account

Which allows only foreign credits from outside India into the account

Key Takeaways of NRE Account

1) Acronym

Non Resident External Account

2) Meaning

It is an account of an NRI to transfer foreign earnings to India

3) Taxability

Interest earned is tax free

4) Repatriability

Can Repatriate

5) Joint Account

Can be opened by two NRIs

6) Deposits and Withdrawals

Can deposit in foreign currency and withdraw in Indian currency

7) Exchange Rate Risk

Prone to risk

Eligibility for NRE Account

You are eligible if you are a non-resident individual of Indian nationality or person of Indian origin

Tax for NRE Account

NRE accounts are exempt from tax

Neither the balance, nor the interest earned on these accounts are taxable according to the Income Tax Act 1961

Types of NRI Accounts

1) Non-resident Ordinary (NRO) Savings Account / Fixed deposit account

2) Non-resident External (NRE) Savings Account / Fixed deposit account

3) Foreign Currency Non-resident (FCNR) Fixed deposit account

Features of NRE Account

1) Rupee-denominated

The amount that the account holder saves is maintained in Indian Rupees

Hence, even if the amount deposited is in Dollars, it is converted into Indian Rupees at the time of deposit

2) Eligibility

Only Non-Resident Indians are eligible to open the NRE Account

3) International transfer of funds

An NRE Savings Account allows an NRI to Repatriate their funds from an NRE account

4) Transfer to NRO acvounts

Funds can be easily transferred from an NRE savings account to an NRO account

5) Joint NRE accounts

If the NRE account holder is an NRI, they can jointly hold the NRE account with another NRI

6) NRI returning to India

If an NRI returns to India and becomes an Indian resident, their NRE savings account is changed to a regular savings account

Benefits of NRE Account

1) A Joint account can be opened

2) Quick withdrawals

3) Best interest rates

4) Tax exemptions

5) Easy transferability

Who can apply for NRE Savings Account

1) The individual must be an NRI

2) Persons of Indian Origin (PIO) and Overseas Citizens of India (OCIs)

3) Seafarers working in international vessels

4) Students studying at an overseas location

5) Customers going abroad for the first time for employment purposes

Limit of NRE transfer

1) Quantam of transfer

The NRO to NRE transfer limit is cwpped at USD 1 million per financial year

2) Tax Compliance

The amount to be transferred should be eligible for remittance and free from any tax liability

Limitations of NRE Account

1) NRE accounts can not be used to deposit the money earned by an NRI inside the country

2) NRIs have to opt for an NRO account to save their earnings made in India

FD and NRE Account

NRE fixed deposits are a high-return Rupee deposit option for NRIs to invest their foreign income

It helps to earn high tax-free interest and get complete Repatriability on the foreign earnings plus loan upto 90% of the deposit at attractive interest rates

NRE tax limit

1) Rs 0 to Rs 3,00,000 – Nil

2) Rs 3,00,001 to Rs 6,00,000 – 5%

3) Rs 6,00,001 to Rs 9,00,000 – Rs 15000 + 10% of the amount exceeding Rs 6,00,000

4) Rs 9,00,001 to Rs 12,00,000 – Rs 45,000 + 15% of the amount exceeding Rs 9,00,000

5) Rs 12,00,001 to Rs 15,00,000 – Rs 90,000 + 20% amount exceeding Rs 12,00,000

6) Rs 15,00,001 and above – Rs 1,50,000 + 30% of the amount exceeding Rs 15,00,000

NRI Status

A person who us of Indian origin but lives in any foreign country is known as Non-resident Indian (NRI)

Indians can attain NRI status if they stay in India for less than 182 days during the preceding financial year or if people live outside India for business, employment and profession for an indefinite amount of time

Section 6 of Income Tax Act

1) Stayed in India for 182 days or more during the previous financial year

2) Stayed in India for atleast 365 days during the 4 years preceding the current year and atleast 60 days in the current year

3) These days can be in either a single visit or counted over multiple visits to India

Pan Number and NRE Account

If an NRI wishes to undertake any economic activities that involve income tax payment or filing tax returns in india, such as investing in securities, buying property or operating bank accounts, a Pan is required

Risks in NRE Account

1) Deposits made in foreign currencies in an NRE account are subject to conversion into Indian Rupees

2) Such deposits might fluctuate in value due to appreciation of domestic currency (or depreciation of foreign currency) thereby incurring losses during repatriation

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