Best NRE Accounts: NRE Meaning, Full Form, Deposits & Transfers

If you are a Non-Resident Indian (NRI) wondering how to manage your money between countries, you are not alone. Many NRIs who live abroad still want to support their family or make investments back home in India. An NRE account is the answer to their needs.

A Non-Resident External (NRE) account is a bank account used by NRIs to transfer their foreign currency earnings to India. This account is very liquid, and all deposits are fully and freely repatriable to the NRI’s country of residence. 

Let’s explore what NRE stands for, its benefits, and how it compares to an NRO account. 

What is an NRE Account?

What is the full form of NRE? NRE full form is Non-Resident External account. It is a rupee-denominated bank account that an NRI can open in India to deposit foreign currency earnings. 

Some of the features of an NRE account are as follows: 

• You can open an NRE account as a savings account, current account, recurring deposit account, or a fixed deposit account. 
• These accounts can be opened individually or jointly. However, if one wishes to open a joint account, it is possible only with another NRI. 
• NRE accounts are highly liquid, and NRIs can quickly and fully repatriate money from them to their country of residence. Moreover, the interest earned on these accounts is completely tax-free. 
• Deposits into NRE accounts must be earnings outside India. NRIs cannot deposit their domestic earnings (Indian income) in these accounts. 
• NRIs can also operate their accounts from anywhere in the world using net banking facilities. Moreover, banks offer international debit cards so the account holder can transact and withdraw money. 
• These accounts facilitate investments in India. For example, NRIs who want to invest in mutual funds in India can do so using their NRE account. One can also use this account to carry out investments, conduct business and personal banking in India. 
• NRE accounts are exposed to exchange rate fluctuations because the NRI deposits money in foreign currency and takes back the Indian rupee. 

Why Do You Need to Open an NRE Account?

As per FEMA regulations, NRIs can’t continue to use regular Indian savings accounts. That’s where NRE in banking becomes important. With this account, you can legally and efficiently send money to India, save in Indian Rupees, and even invest locally.

This account will allow NRIs to freely repatriate all their money back to their country of residence. Moreover, it will enable an NRI to invest in India. Also, an authorised family member in India can easily access the funds available in the account. Hence, making it a viable option for NRIs who want to look after their family in India.

Eligibility Criteria to Open an NRE Account

The following are the eligibility criteria to open an NRE savings account:

• Should be a Non-Resident Indian (NRI)/Person of Indian Origin/Overseas Citizen of India
• Indian citizen residing in a foreign country for studies, employment or business
• Individuals posted in UN organisations or officially deputed abroad by the Government of India or public sector undertaking
• Indian nationals who are mariners, seafarers, or employees of foreign airlines
• A parent or a grandparent was an Indian citizen under the Constitution of India or the Indian Citizen Act 1955
• Spouse of an Indian citizen or spouse of PIO

Benefits of NRE Account

The following are the benefits of the best NRE accounts in India:

• The funds in the NRE savings account are completely repatriable. In other words, one can freely move funds from India to other foreign accounts.
• Interest earned from funds in the NRE account is not taxable in India. Also, the taxation of the funds is subject to the taxation rules of the country of residence.
• The NRE savings account is also maintained in Indian rupees. Its primary use is to credit funds transferred from an overseas account.
• Using the international debit card, one can withdraw their funds from this account at any time.
• NRE accounts can be used for personal and business purposes. It can also be used to invest in India, such as mutual funds.

How to Open an NRE Account?

Here’s how to open the best NRE accounts:

1. Choose a bank offering NRI services.
2. Download and fill out the NRE account application form.
3. Attach the necessary documents. 
4. Submit the form via mail or by visiting a branch (some banks allow online submission).
5. Complete the KYC and verification process.

Some of the documents required to open an NRE account are:

• Valid passport and visa
• Passport-size photographs
• Overseas address proof
• Proof of NRI status (employment/student visa, work permit, etc.)
• PAN card or Form 60

What Happens to the NRE Account When You Become a Resident Again?

When an NRI comes to India for a short visit, they can continue the account as an NRE savings account. However, if the NRI returns to India permanently, they cannot maintain the NRE savings account.

They will have to convert this account to a resident rupee account. If the NRI wants to hold the money in foreign currency, they can convert it to a resident foreign currency (RFC) Account.

Difference between an NRE Account and an NRO Account

Here are some differences between NRO and NRE accounts:

Basis of Difference	NRE Account	NRO Account
Definition	These accounts are for depositing foreign income in India.	These accounts are for depositing income earned in India.
Repatriability	The NRE deposits and the interest earned on them are fully repatriable.	One can transfer/ repatriate USD 1 million in a year from an NRO account.
Taxation	Interest earned on the NRE deposit is exempt from tax in India.	The income from the NRO account is taxable. NRIs can reduce their tax liability by availing benefits under the Double Taxation Avoidance Agreement with a few countries.
Deposit and Withdrawal Currency	Can deposit in foreign currency and withdraw in Indian Rupee.	Deposits can be in Indian as well as foreign currency. However withdrawals are allowed only in Indian currency.
Deposit Rules	One can deposit any amount in foreign currency.	One can deposit any amount in foreign currency. Furthermore, rupee-denominated funds originating in India can be deposited only in NRO accounts.
Fund Transfer	NRE to NRE transfer is allowed. That means one can transfer funds from one NRE savings account to another NRE savings account and also an NRO account.	Funds from one NRO account can be transferred to another NRO account. However, they cannot be transferred to another NRE savings account.
Joint Account	One can open an account jointly only with an NRI.	NRO accounts do not have any restrictions, and one can open one with an Indian resident.
Currency Fluctuations	The deposits are exposed to exchange rate fluctuations and also currency loss.	The deposits are not exposed to currency fluctuations.

Final Thoughts

An NRE account is more than just a banking solution. It is a bridge that connects your financial life abroad with your obligations and goals in India. Whether you’re looking to support your family, save for future plans, or invest in Indian opportunities, NRE accounts offer flexibility, tax benefits, and ease of access. 

By understanding what an NRE account offers and how it differs from an NRO account, NRIs can make informed decisions that optimise their foreign income. 

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