Non-Resident Indians or NRIs often face a situation where they need to maintain a rupee account in India while they themselves stay and work in a foreign country. Primarily, there are two reasons for this, either to repatriate money earned overseas back to India or to keep income based in India within the country. In such situation, two choices are available to them, the Non-Resident Rupee (NRE) account, or the Non-Resident Ordinary Rupee (NRO) account. Both these accounts can be current or savings accounts and are in Indian Rupees. The minimum average monthly balance needs to be Rs.75, 000 in both. While both these accounts have their own advantages, the NRE account provides some more benefits over the NRO account to NRIs. Here are some reasons why the NRE account is actually the best choice for an NRI.
Repatriability: Repatriability is the ability of assets of a citizen or investor of one country generated in a country to be moved to the home country. The NRE accounts are repatriable freely. This means that both the principal and the interest earned on such accounts are completely repatriable to a foreign account without any limit. In comparison, the NRO accounts have ‘restricted repatriability’, repatribility is allowed only up to a fixed limit.
Taxability: NRE accounts are tax-free in India. This means NRE accounts are completely exempt from income tax, wealth tax, as well as gift tax in the country. This makes for a good way to save money for emergencies as well as for future plans free of tax. Money deposited in the NRO account is taxable at a rate of 30% according to the Income Tax Act of 1961.
Apart from the above two principal benefits, NRE accounts can be opened jointly by two non-resident Indians, while NRO accounts can be opened jointly with a resident Indian as well as another NRI. NRE accounts provide a way for savings to be stored in the country in a liquid form. Funds generated in foreign countries can be deposited in both these accounts. However, funds generated in India in Indian currency can only be deposited in the NRO accounts.
Withdrawals from both NRE and NRO accounts are in the Indian currency. NRE accounts are subject to fluctuations in the international currency rate.
Repatriability: Repatriability is the ability of assets of a citizen or investor of one country generated in a country to be moved to the home country. The NRE accounts are repatriable freely. This means that both the principal and the interest earned on such accounts are completely repatriable to a foreign account without any limit. In comparison, the NRO accounts have ‘restricted repatriability’, repatribility is allowed only up to a fixed limit.
Taxability: NRE accounts are tax-free in India. This means NRE accounts are completely exempt from income tax, wealth tax, as well as gift tax in the country. This makes for a good way to save money for emergencies as well as for future plans free of tax. Money deposited in the NRO account is taxable at a rate of 30% according to the Income Tax Act of 1961.
Apart from the above two principal benefits, NRE accounts can be opened jointly by two non-resident Indians, while NRO accounts can be opened jointly with a resident Indian as well as another NRI. NRE accounts provide a way for savings to be stored in the country in a liquid form. Funds generated in foreign countries can be deposited in both these accounts. However, funds generated in India in Indian currency can only be deposited in the NRO accounts.
Withdrawals from both NRE and NRO accounts are in the Indian currency. NRE accounts are subject to fluctuations in the international currency rate.
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