Banking and Finance

NRE and NRO Accounts

Any person resident outside India for putting through bonafide transactions in Indian rupees can open Non-Resident (External) Rupee Account and Non-Resident Ordinary Rupee (NRO) account with Banks in India. Individuals/ entities of Pakistan nationality/ origin and entities of Bangladesh origin require the prior approval of the Reserve Bank of India for opening an account in India. An NRO account can also be opened by a Person of Indian Origin (PIO) and an Overseas Citizen of India (OCI).Both NRE and NRO accounts can be opened as Savings as well as current accounts. One needs to maintain an average monthly balance in both NRE and NRO accounts as specified by the respective banks in India. It is important to know the differences between both these NRE and NRO accounts as this will help in your tax and overall financial planning.

An NRI may open a Non-Resident (External) Rupee Account if he or she would like to keep his or her overseas earnings remitted to India converted to Indian Rupees. NRIs/ PIOs can hold jointly with a resident relative on ‘former or survivor’ basis (relative as defined in Companies Act, 2013). The resident relative can operate the account as a Power of Attorney holder during the life time of the NRI/ PIO account holder. Credits permitted to this account are inward remittance from outside India, interest accruing on the account, interest on investment, transfer from other NRE/ FCNR (B) accounts, maturity proceeds of investments (if such investments were made from this account or through inward remittance).Current income like rent, dividend, pension, interest etc. earned overseas will be construed as a permissible credit to the NRE account. Only those credits which have not lost repatriable character are permitted in NRE accounts. Another major important feature of NRE account is income earned in the NRE account is exempt from income tax and balances exempt from wealth tax and the Principal and interest earned in NRE account is freely repatriable.

An NRI may open a Non-Resident Ordinary Rupee (NRO) account if he or she would like to keep his or her earnings generated in India such as rent, dividends etc. Inward remittances from outside India, legitimate dues in India and transfers from other NRO accounts are permissible credits to NRO account. NRO account may be held jointly in the names of two or more NRIs/ PIOs.It may also be held jointly with residents on ‘former or survivor’ basis. Rupee gift/ loan made by a resident to a NRI/ PIO relative within the limits prescribed under the Liberalised Remittance Scheme may be credited to the latter’s NRO account. Funds from NRO account can be repatriated abroad by NRIs and PIOs subject to conditions specified in Foreign Exchange Management (Remittance of Assets) Regulations, 2016. Income earned in NRO account is subject to income tax.

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