NRE Account, NRO Account : Non resident Indians might have faced a situation where they have to maintain a bank account India. Two types of accounts are completely dedicated to the Non resident Indians. They are
- NRE account
- NRO account
These two accounts are rupee accounts which means that they are intended for maintaining the money in denomination of Indian rupees. Both the accounts are available to open as savings and current account.
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NRE Account – features:
NRE account means Non–Resident External is meant for saving the amount of income earned by the nonresident Indians while they are in foreign. Means the income earned by the NRI s in abroad is kept in NRE account
A. Eligibility:
- Non-Resident Indians
- Individuals / entities of Bangladesh / Pakistan nationality/ownership require prior approval of RBI
B. Nomination:
Nomination is available. One can nominate a person as a nominee in accordance with rules laid down by RBI.
C. Repatriations:
When it comes to repatriation of funds including the interest earned in NRE accounts RBI has nothing to interfere with.
D. Available Types of Accounts:
- Savings
- Current
- Recurring
- Fixed Deposit
E. Rate of Interest:
As per RBI With effect from March 1, 2014, interest rates offered by banks on NRE deposits cannot be higher than those offered by them on comparable domestic rupee deposits.
F. Transfer of funds:
Transfer of funds from NRE account to NRO account are allowed. But the vice versa is not allowed.
G. Taxation:
Interest earned by the amount in NRE account is exempted from tax. As the amount is already taxed outside India it does not form part of the assessee’s taxable income in India.
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H. Joint Account:
NRE account can be opened in joint names with an NRI but not with an Indian Resident
NRO Account – Features:
NRO means Non-Resident Ordinary .NRO Accounts are meant for saving the money earned by the Nonresident Indians in India. It does not have anything to do with exchange rate fluctuations since it is earned in India in rupees.
A. Eligibility:
- Any person resident outside India (other than a person resident in Nepal and Bhutan)
- Individuals / entities of Pakistan nationality / ownership, entities of Bangladesh ownership and erstwhile Overseas Corporate Bodies require prior approval of the Reserve Bank.
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B. Nomination: Nomination is available. One can nominate a person as a nominee in accordance with rules laid down by RBI.
C. Repatriations:
Some restrictions have been imposed by RBI on the repatriation made in NRO account.
Following transactions are repatriable:
- all current income and
- Up to USD 1 million per financial year.
D. Available Types of Accounts:
- Savings
- Current
- Recurring
- Fixed Deposit
E. Rate of Interest:
- Banks are free to determine their interest rates on savings deposits under Ordinary Non-Resident (NRO) Accounts
- But interest rates offered by banks on NRO deposits cannot be higher than those offered by them on comparable domestic rupee deposits.
F. Transfer of funds:
Transfer of funds from an NRO account to an NRE account is not permitted.
G. Taxation:
NRO accounts falls under the taxation slab- 30 percent along with 3 percent education cess is deducted as TDS. This charge is applicable to fixed deposits as well as savings account
H. Joint Account:
NRO account can be jointly opened by a NRI and an Indian resident/NRI .
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