Frequently Asked Questions About Non-Resident External Accounts

The NRE account is an Indian Rupee denominated account, which is freely repatribale. This form of NRI account can be in the form of savings, current, recurring or fixed deposits. The income is deemed to be earned outside India. Indian Rupees cannot be deposited into this account, only foreign currency can be deposited which will be converted into Indian Rupee at the time of deposit. To learn more about NRE account, see the below FAQ's

NRE Accounts: Frequently Asked Questions:

Who can open a NRE Account?

Any Non Resident Indian or Person of Indian Origin can open a NRE Account. Individuals from Bangladesh & Pakistan can also open NRE Accounts, but would need prior permission of Reserve Bank of India (RBI) to do so. A person can mean an individual, a company, a partnership, a trust etc can open a NRE Account.

Who is a NRI?

A NRI or Non Resident Indian is an individual who resides outside India, but is an Indian Citizen.

Who is a PIO?

A ‘Person of Indian Origin (PIO)’ is 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:

• Who was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955); or
• Who belonged to a territory that became part of India after the 15th day of August, 1947; or
• Who is a child or a grandchild or a great grandchild of a citizen of India or of a person referred to in clause (a) or (b); or
• Who is a spouse of foreign origin of a citizen of India or spouse of foreign origin of a person referred to in clause (a) or (b) or (c)

A PIO will include an ‘Overseas Citizen of India’ cardholder within the meaning of Section 7(A) of the Citizenship Act, 1955. Such an OCI Card holder should also be a person resident outside India.

Can the NRE Account be a Joint Account?

Yes, the NRE Account can be a Joint Account, provided all the account holders are either NRIs or PIOs or any combination of the two.

What is the Currency of the NRE Account?

The NRE Account is an INR denominated account.

What kind of accounts can be opened as a NRE Account?

NRE Account can be a Savings Account, a Current(Checking) Account, a Fixed Deposit Account or a Recurring Deposit Account.

What is the period of Fixed Deposits or Recurring Deposits?

The Fixed Deposit or Recurring Deposit can be for a period between one year to three years. However it is at the discretion of the bank where the NRE account has been opened, to allow a period above three years.

What are the permitted credits into a NRE Account?

The permitted credits into the NRE Account are:

• Inward Remittances from outside India
• Interest Accruing on the account balance
• Interest on Investment
• Transfer from other NRE or FCNR Account
• Maturity proceeds of any investment made originally from this account
• Current Income like rent, dividend, pension, Interest etc.
• Foreign currency, suitably converted into INR at the forex rates of the bank on the given day

What are the permitted debits from the NRE Account?

The permitted debits are:

• Local Disbursements
• Remittance outside India
• Transfer to another NRE/FCNR Account
• Investments in India

How much can be repatriated abroad from the NRE Account?

NRE account balance can be fully repatriated, which means the total balance of the NRE account can be sent abroad.

What is the taxation on the NRE Account?

Income earned in the account is exempt from Income Tax in India. The balance is also exempt from Wealth Tax. Which means that this account is tax free, in India.

Can Loans be availed in India on the security of the NRE Account?

Yes, the banks can give loans on the security of the NRE Account to the account holder or third parties, as per their lending norms. There are no limits prescribed by the RBI on the same.

Where can the loans be utilized?

The loans taken on the basis of the NRE account cannot be repatriated abroad. It can be used in India only for the purposes specified in the loan application as read along with the regulations.

How can the loans be repaid if these are taken by the account holder?

The repayment of the loan can be done by inward remittance. It can also be repaid by utilizing the balance held by the account holder in their NRO Accounts.

Can the person taking the loan utilize premature withdrawals?

No, premature withdrawals are not allowed if the loan has been taken basis the security of the NRE Account.

What is the Rate of Interest of NRE Account?

The rate of interest on NRE Account are based on the directives of RBI under the guidelines issued by the department of Banking Regulations. These are generally in the range of 1.5% to 2.5% per annum.

Can the NRE Account be operated under a Power of Attorney (POA)?

Yes, the NRE Account can be operated under a POA. There are restrictions on the application of the POA. These restrictions are applicable to withdrawals for local payments or remittance to the account from abroad.

What happens when there is a change in the status of the Non Resident to Resident, as regards NRE Account?

The NRE Account is then designated as a Resident account or the funds held in this account are transferred to a Resident Domestic Account, at the option of the account holder.

What is the time limit for the change of the account status of the person who becomes a Resident from Non Resident?

The account holder should immediately intimate the bank of the change of the status.