Non-Resident External (NRE) is a type of bank account available to Indian nationals who reside abroad. It allows individuals to park their foreign earnings in Indian banks and earn interest on them.
Key features of NRE accounts include:
Non-Resident individuals of Indian Nationality or origin (Opening of NRE accounts in the names of Pakistani / Bangladeshi individuals / entities require prior approval of Reserve Bank of India).
Remittances received from abroad in an approved manner in freely convertible currency, Transfer from NRE/FCNR accounts.
Accounts may be opened in the name of any eligible NRI during his temporary visit to India against tender of foreign currency, TCs issued in his own name or notes and coins tendered provided the branch is satisfied that the status of the person continues to be a non-resident.
Branches should ensure that TCs and currency notes tendered by the account holder have in fact been brought by him from abroad and not acquired locally.
Transfers from NRO account to NRE account are permitted subject to ceiling of USD one million per financial year)
SB, CD, Term Deposit
Term Deposits – 12 months to 120 months
SB – TD- (As per Central Office Circular issued from time to time) No additional interest is payable on deposit accounts of staff members.
Joint NRE accounts in the names of two or more non-resident individuals is permitted provided all the account holders are persons of Indian Nationality or Origin. If the spouse of an NRI is a foreign national, the status of such a person will be that of a Person of Indian Origin. However, such persons are permitted to have only joint bank accounts along with the spouse.
Residents can also be joint account holders in NRE accounts on a ‘former or survivor’ basis.
Freely repatriable.
Nominee can be a person resident in India or a person resident outside India. In the case of Non-resident nominee, authorised dealers are allowed to remit funds lying in the account of the deceased account holder to the non-resident nominee.
Income from interest on monies standing to the credit of NRE accounts is exempt from Income Tax. Balances held in the accounts are exempt from Wealth Tax. Gifts made to close relatives in India from out of balances in such accounts are also free from Gift Tax. (These Tax exemptions are available only in respect of NRE accounts maintained by NRIs and any fresh directive issued will prevail)
1% penalty on withdrawal of term deposits above Rs 15000.00 with effect from 08.01.2015 on fresh deposits and after the above cut-off date.
If an overdue deposit renewed with interest payment for the overdue period, is closed prematurely before completing the minimum period for which such deposits are accepted from the date of renewal, no interest is payable on the deposit and the interest already paid for the overdue period should also be recovered.
Renewal of deposit can be done if the depositor’s status is NRI. Renewal must be made within 14 days from the due date to get retrospective effect and must be renewed for the minimum period prescribed. If the overdue period is less than one year, the interest rate for one year prevailing on date of maturity or renewal, whichever is lower, is to be applied.
NRE accounts should be redesignated as resident rupee accounts or as RFC accounts (if eligible) at the option of account holder immediately upon the return of account holder to India provided the branch is satisfied that he has returned to India for taking up employment or for carrying on a business or vocation or for any other purpose with an intention of residing in India for an uncertain period.
Where the account holder is only on a short visit to India, the account may continue to be treated as NRE account even during his stay in this country.
In respect of funds held in fixed deposits in NRE accounts, interest will be payable at the rate originally fixed, provided the deposit is held for the full term even after conversion into resident account.
Branches may allow transactions in NRE accounts complying with instructions contained in FEMA Notification No. FEMA 5/2000-RB dated 3rd May 2000.
At the time of opening of the accounts, the account holders should give an undertaking that in cases of debits to the accounts for the purpose of investment in India and credits representing sale proceeds of investments, they would ensure that such investments/ disinvestments would be covered by the general or special permission of Reserve Bank of India.
Credits: Proceeds of remittances in any permitted currency from outside India through normal banking channels or any permitted currency tendered by the account holder during his temporary visit to India or transfers from rupee accounts of non-resident banks. Other legitimate dues in India of the account holder.
Debits: All local payments in rupees including payments for investments subject to compliance with the relevant regulations made by the Reserve Bank and remittance outside India of current income in India of the account holder net of applicable tax.
A resident can be authorised by the NRI by way of Power of Attorney or Mandate Letter to operate the NRE accounts. The withdrawals are restricted to local payments only by the mandate holder. Operations on the account in terms of Power of Attorney is restricted to withdrawals for permissible local payments or remittance to the account holder himself through normal banking channels.
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