The NRE or Non-Resident Rupee account is a type of savings account that is mostly acquired by Non-Resident Indians. It can also be redesigned for a fixed deposit account or a recurring deposit account. The foreign currency which is deposited into the NRE savings account is converted into Indian rupees.


The deposits that are made into the NRE accounts must be earned outside India, these deposits than can be transferred to a foreign account without any restrictions or limitations. Primarily, NRE accounts are used for making investments, doing business and purchases in India. But before you avail of an NRE savings account, you must know about those facilities it offers and then decides if that suits your requirements. Hence, you need to know all the perks related to NRE accounts.


Tax exemption on NRE account


The income that is earned through an NRE account is exempted from tax under Indian tax laws. An ordinary account qualifies TDS when the income in all savings account is more than Rs. 10,000 in the final year. So, one needs to keep that in mind while transferring funds in NRO account. Because NRO account is not exempted from taxes.


Purpose of NRE account


NRIs can send back their overseas earned income in India by using an NRE or Non- Resident Rupee. It also helps NRIs to send money to parents, spouse, or relative who lives in India. Therefore, NRE accounts are available in forms of current, savings, fixed deposits, etc. Besides, the NRE account is supported by 24/7 online banking facilities. Moreover, the funds can also be transferred to your NRO account.


Difference between NRE and NRO account


NRIs can deposit cash in both international and Indian currency and withdraw the money in Indian currency by using an NRO or Non-Resident Ordinary Rupee account. Thus, when someone becomes NRI, then their savings account is instantly changed into the NRO account. On the other hand, NRIs can deposit money only in foreign currency and withdraw cash in Indian currency through an NRE or Non-Resident Rupee account.


NRO or Non-Resident Ordinary Rupee joint account can be opened by an NRI with another Indian relative or an NRI. Whereas, An NRE or Non-Resident Rupee joint account can be opened by an NRI with another NRI. Besides, you can send money from any country to India through an NRE or Non-Resident Rupee account. Unlike the NRO account, NRE or Non-Resident Rupee account money is only deposited deposit in foreign currencies and withdrawn in Indian currencies, so it is prone to exchange risks.


As mentioned earlier, The income earned by NRIs under Non-Resident Rupee or NRE account is tax-free in India. But, interest earned through NRO account and credit balances is subject to wealth and gift tax. NRIs have the liberty to repatriate money through an NRE or Non-Resident Rupee account as they get access to both the principal amount and interest component, which is tax-free. On the contrary, NRIs can not enjoy this freedom with the NRO account or Non-Resident Ordinary Rupee account because one can only remit 1 USD, including taxes during an assessment year.


Benefits of NRE account


One of the most significant benefits of an NRE account is that interest earned through this kind of account is free from taxation. Besides, if you live in another country and you need to send money back in India then you can use this account as the withdrawn amount will always be in Indian currency. Sometimes NRIs find it challenging to manage their accounts, but NRE accounts make their tasks easier.


Why you should choose NRE account


NRE or Non-Resident Rupee account provides full liberty to the NRIs while repatriating money from overseas because the principal amount and interest component are free of tax. Hence, even if you are not able to attend your family functions, festivals, or any medical emergency still, you can send them money through your NRE account. But you should be careful if you are transferring funds in your NRO account because the interest earned through the NRO account is subject to gift and wealth tax.


Things to consider before opening an NRE account


Before opening an NRE account in a bank, you need to check that if you can avail of the services of the NRE account in your country. Besides, don’t forget to check the interest rate in case you are planning to transfer a large sum of money through your account. However, facilities and offers provided by the banks can change with time, so it’s wise to choose a trusted lender.


As an NRI, if you are not clear about the pros and cons of an NRE or Non-Resident Rupee account, then you won’t be able to handle your income and investments carefully. Hopefully, these points, as mentioned above, will help you to know everything about NRE accounts.