What is an NRE Account? Features & benefits explained

NRIs earning in foreign currency can use NRE (Non-Resident External) accounts to withdraw funds in Indian Rupees.

Many Non-Resident Indians (NRIs) seek to earn money in a foreign currency and save it in the Indian denomination. An NRE account is an effective way to do the same for an NRI since it helps them access a range of services besides the ones offered by ordinary savings accounts. Read on to learn the functioning of NRE accounts.

What is an NRE account?
 

A Non-Resident External (NRE) account helps an NRI deposit their foreign currency savings in an Indian bank. Using an NRE account, an account holder can deposit money in any foreign denomination and withdraw it in INR (Indian Rupees).

Which types of accounts can an NRI open?
 

According to the guidelines issued by the Foreign Exchange Management Act (FEMA), the Reserve Bank of India (RBI) allows an NRI to open two types of savings bank accounts with authorised dealers and banks – a Non-Resident External Rupee Account (NRE) and a Non-Resident Ordinary Rupee (NRO) account.

Besides these two options, if an NRI wishes to deposit a lump sum in a term deposit at a stipulated maturity rate in a foreign currency, they can also open an FCNR (B) (Foreign Currency Non-Resident (Bank)) deposit account.

Differences between NRE and NRO accounts
 

1. Purpose
   • NRE account: Primarily used to park overseas earnings in India. Funds in this account are fully repatriable, meaning both the principal and interest can be transferred abroad without restrictions.
   • NRO account: Designed to manage income earned in India, such as rent, dividends, or pensions. While repatriation is allowed, it is subject to certain limits and taxes.
2. Repatriation
   • NRE account: Full repatriability of both principal and interest.
   • NRO account: Repatriation of principal is restricted to USD 1 million per financial year, while interest is repatriable after-tax deduction.
3. Taxation
   • NRE account: Interest earned is tax-exempt.
   • NRO account: Interest earned is subject to Indian income tax, as well as applicable surcharge and cess.

What are the features of an NRE account?
 

As mentioned earlier, an NRE account can help an NRI access a range of services not offered by standard savings accounts.

• Rupee-denominated: NRE savings accounts are rupee-denominated. In simpler terms, the amount that the account holder saves is maintained in Indian Rupees. Hence, even if the amount deposited is in Dollars, it is converted into Indian Rupees at the time of deposit.
• Eligibility: Only Non-Resident Indians are eligible to open an NRE account.
• International transfer of funds: An NRE savings account allows an NRI to repatriate their funds from an NRE account.
• Transfer to NRO accounts: Funds can be easily transferred from an NRE savings account to an NRO account.
• Joint NRE accounts: If the NRE account holder is an NRI, they can jointly hold the NRE account with another NRI or a resident Indian on former or survivor basis only.
• NRI returning to India: If an NRI returns to India and becomes an Indian resident, their NRE savings account is changed to a regular resident savings account.

What are the benefits of having an NRE account?
 

There are several benefits to having an NRE account if you are an NRI.

• A joint account can be opened: One of the major benefits of opening an NRE account, as already mentioned in the features, is the ability to open an NRE account. If both the account holders of an NRE account are NRIs, they can jointly open a single NRE account that can cater to all of their banking needs. Kindly note that you can open joint NRE savings account with an Indian resident only on a ‘former’ or ‘survivor’ basis.
• Quick withdrawals: Withdrawing an amount from an NRE account using an international debit card is quick and easy. Metra Trust allows its NRE account holders to access their savings account online through internet banking or via Metra Trust’s mobile banking app
• Best interest rates: An NRE account offers competitive interest rates compared to regular savings accounts. Metra Trust’s NRE savings account interest rates are calculated on daily balances and are paid at the end of every month. Check the rates here.
• Tax exemptions: You can earn big via tax exemptions on your foreign income with an NRE savings account.
• Easy transferability: NRE funds are freely repatriable and can be to any account including resident account.

Who can apply for an NRE savings account?
 

To be eligible to apply for an NRE savings account with Metra Trust, an applicant needs to fulfil the following criteria:

• The individual must be an NRI.
• Persons of Indian Origin (PIO) and Overseas Citizens of India (OCIs) can also apply for an NRE account.
• Seafarers working on international vessels can also apply for an NRE account.
• Students studying at an overseas location can also apply for an NRE account.
• Customers going abroad for the first time for employment purpose

NRE and NRO are helpful for NRIs. They can deposit funds in foreign denomination and withdraw in Indian Rupees. Their family in India can also access the NRI saving account and meet their needs.