NRE accounts: Repatriable and pay no income or wealth tax

The personal finance world for a non-resident Indian who is navigating through different regulatory environments can get very complicated so Connected to India would like to re-introduce you to some basics.

The first in this Education series is a do and dont's list about the rules governing the opening of a Non-Resident External Rupee Account (NRE) for Non-Resident Indians, according to the Reserve Bank of India.

Non-Resident Indian: A person resident outside India who is a citizen of India.

Person of Indian Origin (PIO): A person resident outside India who is a citizen of any country other than Bangladesh or Pakistan or such other country as may be specified by the Central Government, satisfying the following conditions:

  1. Who was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955); or
  2. Who belonged to a territory that became part of India after the 15th day of August, 1947; or
  3. Who is a child or a grandchild or a great grandchild of a citizen of India; or
  4. Who is a spouse of foreign origin of a citizen of India.

A PIO will include an ‘Overseas Citizen of India’ cardholder. Such an OCI Card holder should also be a person who is a resident outside India.

Non-Resident External Rupee Account (NRE):

  • NRIs and PIOs can open this account. Residents of Pakistan and Bangladesh require prior approval from the Reserve Bank of India.
  • May be held jointly in the names of two or more NRIs/PIOs. They can hold the account jointly with a resident relative on former or survivor basis. The resident relative can operate the account as a Power of Attorney holder during the lifetime of the NRI/PIO.
  • Account only in Indian Rupees. You could open a simple savings account, current account and a fixed deposit. The fixed deposit tenure can range from one to three years. Banks can accept NRE deposits for more than three years.
  • Credits to this account are inward remittances from outside India, interest on the account, interest on investment, transfer from other NRE accounts or Foreign Currency Non-Resident (Banks) accounts, maturity proceeds of investments (if such investments were made from this account or through inward remittance)
  • Current income like rent, dividend, pension, interest will be considered as permissible credit to the NRE account. Other permissible debits are local disbursements, remittances outside India, transfer to other NRE/FCNR(B) accounts and investments in India.
  • All the money in this account is Repatriable. So money in this account can be withdrawn for use in your offshore place of residence.
  • No income tax on income earned on these accounts. Balances also exempt from wealth tax.
  • NRE account holders can get loans in India without any limit, subject to usual margin requirements. These loans cannot be repatriated outside India and can be used in India only.
  • If loans are taken for a third party, there should be no direct or indirect agreement to pledge the NRE deposit holder to enable the resident Indian individual, firm, company to get the loan.
  • Loan taken by NRE account holder can be repaid by adjusting deposits or through inward remittances from outside India through banking channels or out of balance held in the Non-Resident (Ordinary) account of the same account holder.
  • You cannot prematurely withdraw fixed deposits if loans are taken against them
  • Power of Attorney on an NRE account can only do withdrawals for local payments or for remittances to the account holder through normal banking channels
  • NRE accounts should be designated resident accounts if the NRI returns to India to take up employment or changes his residential status.
Author
CtoI News Desk
CtoI News Desk – CtoI

Singapore-headquartered online media company targeting Indian Diaspora across Singapore, US, UK, India and UAE. Connected to India covers developments around NRIs. Cover arts, political, sports, finance, entrepreneurship, business, movies, dramas, entertainment and other news for Indians living worldwide.

Comments