Travelling on the job is a reality in the life of a multi-national corporate employee. Some people are transferred abroad on secondments while others use foreign travel opportunities to find a job abroad. Whatever the case may be, such people are confused about maintaining their bank accounts. They also have questions about what happens to their existing savings if they have to move abroad for work, for an extended period of time. If you are one of these people here’s everything you need to know about opening an NRE savings account.
Which account do I need?
Not everyone who travels abroad for work needs to make changes to their existing savings account. If your work takes you to a foreign country and you return to India within 6 months, you do not need to make any changes to your account. However, if you are travelling for work and must be based in a foreign country for more than 6 months in any given calendar year, you must inform your bank immediately and your bank will convert your account into an NRE account or Non-Resident external account.
Importance of the term
An Indian citizen who spends more than 182 days (or 6 months) abroad in a given financial year, is referred to as an NRI (Non Resident India) purely because he is exempted from paying taxes in India in that particular year. However, if he spends less than the given 182 abroad, he does not receive tax exemptions and will be treated as an Indian resident. He must pay a tax on his global income as per the Indian tax laws. For an annual income of more than 10 lacs, he must pay taxes at 30% per annum. However, such individuals do have the option of claiming a tax rebate.
Why should you convert your account to NRE?
If you are posted abroad for a long time, chances are that you may receive your salary in foreign currency. If you are on a secondment, you may continue receiving your salary in INR since you would be returning to your homeland at the end of the secondment term. Since you cannot continue holding your resident savings account once you assume NRI status, you can opt to open an NRE savings account in which you can deposit foreign currencies such as USD, EUR, GBP etc. You can continue funding your investments in India from your NRE account.
Why is NRE a better option?
The rate of interest you earn on your NRE account in India is tax-free. For instance if you make a fixed deposit of ₹5 lacs, which doubles to ₹ 10 Lacs in say, 7 years, then you needn’t pay tax on maturity, even if you are an Indian resident at the time of your FD’s maturity. The NRE account allows you to save a lot of money as FD is taxable on both Resident savings as well as NRO accounts.
Which account do I need?
Not everyone who travels abroad for work needs to make changes to their existing savings account. If your work takes you to a foreign country and you return to India within 6 months, you do not need to make any changes to your account. However, if you are travelling for work and must be based in a foreign country for more than 6 months in any given calendar year, you must inform your bank immediately and your bank will convert your account into an NRE account or Non-Resident external account.
Importance of the term
An Indian citizen who spends more than 182 days (or 6 months) abroad in a given financial year, is referred to as an NRI (Non Resident India) purely because he is exempted from paying taxes in India in that particular year. However, if he spends less than the given 182 abroad, he does not receive tax exemptions and will be treated as an Indian resident. He must pay a tax on his global income as per the Indian tax laws. For an annual income of more than 10 lacs, he must pay taxes at 30% per annum. However, such individuals do have the option of claiming a tax rebate.
Why should you convert your account to NRE?
If you are posted abroad for a long time, chances are that you may receive your salary in foreign currency. If you are on a secondment, you may continue receiving your salary in INR since you would be returning to your homeland at the end of the secondment term. Since you cannot continue holding your resident savings account once you assume NRI status, you can opt to open an NRE savings account in which you can deposit foreign currencies such as USD, EUR, GBP etc. You can continue funding your investments in India from your NRE account.
Why is NRE a better option?
The rate of interest you earn on your NRE account in India is tax-free. For instance if you make a fixed deposit of ₹5 lacs, which doubles to ₹ 10 Lacs in say, 7 years, then you needn’t pay tax on maturity, even if you are an Indian resident at the time of your FD’s maturity. The NRE account allows you to save a lot of money as FD is taxable on both Resident savings as well as NRO accounts.
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