Nonresident Indians (NRIs) have long been able to take advantage of certain financial benefits available to them, but there is some confusion about the difference between NRI and NRE accounts. This blog post will clear up any confusion and help you understand which account is best for you. There are several types of NRIs, each with its own set of tax and investment rules. The most common type is an NRI who is a citizen of another country but has residency in India.
What is NRI Account?
NRI Accounts are special accounts that have been designed keeping in mind the banking needs of NRIs. NRI accounts can be either in the form of savings accounts or term deposits. The main features of NRI accounts are that they offer higher interest rates as compared to a regular savings account and they also provide easy access to money for NRIs. NRI accounts also offer some special benefits like loans against the security of NRI accounts and credit card facilities against NRI accounts.
What is NRE Account?
- NRE Account is a term used in India to refer to a Foreign Currency Non-Resident account. NRE accounts can be opened by Indian citizens living abroad, as well as foreign nationals of Indian origin. NRE accounts are used to hold, save and invest foreign currency earnings. NRE account holders can freely repatriate their funds back to their home countries. NRE deposits are also exempt from income tax in India.
- NRE accounts can be held either as savings accounts, fixed deposits, or as a combination of both. NRE account holders earn interest on their deposits, which are paid in the form of foreign currency. NRE accounts are denominated in Indian Rupees but can be used to hold, save and invest foreign currency earnings. NRE accounts are used to make foreign currency transactions in India. NRE account holders can freely repatriate their funds back to their home countries.
- NRE accounts are subject to income tax in India. NRE deposits are also exempt from income tax in India. NRE account holders earn interest on their deposits, which are paid in the form of foreign currency. NRE accounts are denominated in Indian Rupees but can be used to hold, save and invest foreign currency earnings.
Difference between NRI and NRE Accounts
NRI and NRE Accounts are both designed for Non-Resident Indians (NRIs). NRE Accounts are Savings or Current Accounts whereby the deposits can be made in any freely convertible foreign currency. NRO Accounts are best suited for NRIs who have a regular income in India from rent, interest, or dividend income. The NRO account can also be used for local expenses such as electricity and telephone bills. Deposits made into NRO accounts are denominated in Indian Rupees. NRI accounts can be opened with any scheduled commercial bank in India.
The main difference between NRI and NRE Accounts is that NRE Accounts are denominated in foreign currency, while NRO Accounts are denominated in Indian Rupees. NRE Accounts also offer repatriation benefits, meaning that the money can be transferred back to the account holder’s home country. NRO Accounts do not offer this benefit instead, the money must be converted into foreign currency before it can be transferred out of India. Another key difference is that NRE Accounts earn interest that is exempt from taxes in India, while NRO Accounts are subject to taxation.
Conclusion
NRI and NRE accounts have different benefits, so it is important for individuals to understand the difference before opening an account. If you are looking for a secure place to invest your money, an NRE account may be the right choice for you.
