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About Non-Resident External (NRE) Account
Funds can be repatriated from an NRE account. This means that the funds
can be freely sent to any other country.
An NRE account can contain funds remitted from abroad, or obtained from
another NRE / FCNR account maintained in India.
An NRE account can be held jointly, provided the other person is also an
NRI.
If the NRI holding the NRE account returns to India and becomes a
resident of India, the NRE account is converted into a regular resident
account.
General
Persons of Indian nationality or origin resident abroad may open, with authorised banks
in India, Non-resident (External) Accounts (NRE Accounts), designated in rupees.
These accounts can be maintained in the form of savings, current or term deposit
accounts. Opening of NRE Accounts jointly in the names of two or more non residents is
permitted provided all the account holders are persons of Indian nationality or origin. For
opening these accounts, the funds are required to be remitted to India through (a)
proceeds of foreign exchange remittances from abroad through banking channels in an
approved manner.
(b) proceeds of foreign currency notes and traveller cheques brought into India by the
non-resident while on a temporary visit to India.
(c) transfer from an existing Non-Resident (External) FCNR account of the same
person.
The account holder has to furnish an undertaking on the account opening form that he
would promptly send intimation to his bank if and when he returns to India for
permanent residence.
Proceeds of remittance arranged by the account holder through banking channels from
any country can be credited to this account. Similarly, income from the account holder’s
investment from the funds in the account can be credited to it, except in cases where
the investments are permitted on non-repatriable basis. Remittances from the account
to the country of residence of the account holder or any other country are freely allowed.
Authorised dealers may allow operations on NRE Accounts by persons resident in India in
terms of Powers of Attorney (Annexure 14.5) or other appropriate authority granted in
their favour of non-resident account holders, provided the powers are restricted to
withdrawals for local payments.
Type of Account
All types of accounts ie. current, savings and term deposit etc. can be opened under
Non-resident account can grant power of attorney or such other authority to residents in
India for operating their NR (E) Accounts in India. Such authority, is however, restricted
to withdrawals for local payments only. The resident power of attorney holder cannot
repatriate funds held in accounts outside India under any circumstances or make
payment of gifts on behalf of the account holder.
Account can also be opened by an eligible non-resident Indian during his temporary visit
to India, against tender of foreign currency traveler cheques/currency notes, provided
the bank is satisfied that the prospective account holder has not ceased to be a non-
resident. The amount so tendered would be endorsed on the Currency Declaration Form
CDF where applicable, before crediting the rupee equivalent to the account.
There are certain restrictions on operation of NR (E) accounts and Form A2 / Form A4
is to be completed for few transaction. These forms may be completed either by the
resident party to the transaction or by the bank after obtaining necessary information
from the resident party account holder. The undernoted transactions of debits/credits
are permitted in NR(E) accounts:
(i) Proceeds of foreign exchange remittances, drafts, personal cheques etc. in the name
of the account holder.
(ii)Proceeds of foreign currency travellers cheques, drafts and personal cheques drawn
by account holder on a foreign currency account maintained abroad by him deposited by
account holder during his temporary visit to India, provided authorised dealer is satisfied
that the account holder is still normally resident abroad, the travellers cheques/drafts
are standing in the name of account holder and have not been endorsed in his favour
and in the case of travellers cheques, they are discharged by the account holder in the
presence of the bank officials.
(iii) Proceeds of foreign currency/bank notes tendered by account holder during his
temporary visits to India, provided these are tendered to the authorised dealer in person
by the account holder himself and the authorised dealer is satisfied that the account
holder is still normally resident outside India.
ii) Transfer to any other NR (E) of FCNR account of the same person.
iii) Transfer to NR (E) accounts of persons other than the account holder for bona file
personal purpose.
ii) Payments towards purchase price of immovable property by account holder. However,
if the account holder is not an Indian national, declaration to Reserve Bank of India for
acquisition of property under section 31 of Foreign Exchange Regulation Act, 1973 is to
be obtained.
iii) Any other transaction if covered under general or special permission granted by
Reserve Bank.
i) Remittance abroad.
ii) Sale of foreign currency traveller cheques etc. to account holder himself or his
dependants provided that they hold a ticket showing journey date which should not be
later than thirty days from the date of sale.
All other transactions of credit/debit to these accounts not covered under the above
provisions required prior approval of Reserve Bank. Form A4 is to be completed in
duplicate in such cases and forwarded to Reserve Bank through the bank with whom the
account is maintained. The transactions will be put through the account only after a copy
of Form A4 duly approved by Reserve Bank is received back.
Immediately upon return of the account holder to India and on his becoming resident in
India, NR (E) account will be redisignated as resident rupees account or converted to
RFC account as per the option of the account holder.
However, if the account holder is only on a short visit to India, the account will continue
to be treated as NR (E) account even during his stay in India.
In respect of funds held in fixed deposits in NR(E) Accounts, interest will be payable at
the rate originally fixed, provided the deposit is held for the full even after conversions
into resident account.
1. Term deposits for one year and above made by non-residents carry interest at rates
higher than those available to residents in India.
2. The interest on deposits and any other income accruing on the balance in the
accounts are free of Indian Income-tax.
4. Gifts to close relatives in India from out of balances in the accounts are free of Gift-
tax, when gifted before 1st October, 1998, thereafter there is no gift tax in India.
5. The entire credit balance (inclusive of interest earned thereon) can be repatriated
outside India at any time without reference to the Reserve Bank.
7. Purchases of Units of Unit Trust of India (UTI), Central and State Government
Securities and National Plan/Savings Certificates can be made freely from the balances in
these accounts.
9. Account holders are supplied special series of cheques forms for operations on these
accounts.
10. Account holders can avail of loans/overdrafts from banks against security of fixed
deposits in their NRE accounts.
Exchange rates are subject to fluctuation on day to day basis and Indian rupee has
depreciated against all major foreign currencies in recent past. Balances held in Indian
rupees in NR (E) accounts are thus exposed to exchange fluctuation risk.
The process is similar for both accounts. To open an NRO or NRE account, one has to make a
request with an authorised bank. One is then is required to submit documents like utility bill, driving
licence, resident permit, rent received, passport and overseas or Indian bank statement. Also, the
minimum fund has to be remitted to India either as fore remittance and transfer from existing NRE
accounts.
Interest on deposits in an NRE accounts is tax free in India. The balance lying on the account does
not attract wealth tax. Any gifts given from the money lying in this account does not attract gift tax.
The primary disadvantage associated with an NRE account is that it suffers from currency risk and
attracts lower rate of interest in comparison to NRO account.
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