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Non-Resident External Account: 10 Must Know Facts About NRE Account
A Non-Resident External Rupee Account (NRE Account) account may be in the form of savings, current, recurring or fixed deposit accounts with maturity of minimum one year. Such accounts can be opened only by the NRI himself and not through the holder of the power of attorney. Click to know the difference between NRE and NRO account.
NRIs may be permitted to open NRE account with their resident close relatives. The resident close relative shall be eligible to operate the account as a Power of Attorney holder in accordance with the extant instructions during the life time of the NRI/PIO account holder. Going abroad? Click to know- what NRIs should do before going abroad?
10 Must Know Facts About NRE Account are as follows:
1. Account will be maintained in Indian Rupees.
2. Balances held in the NRE account are freely repatriable.
3. Accrued interest income and balances held in NRE accounts are exempt from Income tax and Wealth tax, respectively.
4. Authorised dealers/authorised banks may at their discretion/commercial judgement allow for a period of not more than two weeks, overdrawings in NRE savings bank accounts, up to a limit of Rs.50,000 subject to the condition that such overdrawings together with the interest payable thereon are cleared/repaid within a period of two weeks, out of inward remittances through normal banking channels or by transfer of funds from other NRE/FCNR accounts.
5. Savings - Banks are free to determine the interest rates.
6. Term deposits - Banks are free to determine the interest rates of term deposits of maturity of one year and above. Interest rates offered by banks on NRE deposits cannot be higher than those offered by them on comparable domestic rupee deposits.
7. Permissible credits to NRE account are inward remittance to India in permitted currency, proceeds of account payee cheques, demand drafts / bankers' cheques, issued against encashment of foreign currency, where the instruments issued to the NRE account holder are supported by encashment certificate issued by AD Category-I / Category-II, transfers from other NRE / FCNR accounts, sale proceeds of FDI investments, interest accruing on the funds held in such accounts, interest on Government securities/dividends on units of mutual funds purchased by debit to the NRE/FCNR(B) account of the holder, certain types of refunds, etc.
8. Eligible debits are local disbursements, transfer to other NRE / FCNR accounts of person eligible to open such accounts, remittance outside India, investments in shares / securities/commercial paper of an Indian company, etc.
9. Loans can be extended against security of funds held in NRE Account either to the depositors or third parties without any ceiling subject to usual margin requirements.
10. Such accounts can be operated through power of attorney in favour of residents for the limited purpose of withdrawal of local payments or remittances through normal banking channels to the account holder himself.
Source: RBI
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