NRI's CORNER- NON-RESIDENT (EXTERNAL) [NRE] DEPOSIT ACCOUNT

Non Resident External [NRE] account which is convertible / repatriable Indian rupee account can be opened and maintained by an Indian citizen or a foreign citizen of Indian origin residing outside India and be maintained in the form of savings, current and recurring or fixed deposit accounts.

Provisions as regards eligibility, types of accounts, permitted debits / credits, rate of interest, loans against security of funds held in NR(E) account, change of residential status of account holder, repatriation of funds by NRI nominee, and miscellaneous matters such as joint holding, operations by POA etc. are provided herein.

1.        Definitions :

01.       Non Resident Indian  [NRI] means an Indian citizen or a foreign citizen of Indian origin (excluding citizens of Bangladesh and Pakistan)  residing outside India.

RBI has clarified that students studying abroad also be treated as NRIs under FEMA and thus are eligible for opening  NRE/FCNR a/cs as also foreign investments . 

02.     "Person of Indian Origin" means an Indian citizen or a foreign citizen other than  citizen of Bangladesh and Pakistan who;

        i)       at any time held an Indian Passport, or

        ii)      himself or his parents or grand parents were citizens of India , or

        iii)     is a spouse of an Indian citizen, or

        iv)     is a spouse of person referred to in (i) or (ii) above.

03.      Overseas Corporate Body[OCB] were eligible to open and maintain NRE account till 3.10.2003..

OCB means a Company, Partnership Firm, Society or body wherein 60 % or more ownership lies with NRIs or a Trust wherein 60 % or more financial interest is irrevocably held by NRIs.

04.     ''NRE account' means a Non-Resident External account referred to in clause (i) of sub-regulation (1) of Regulation 5;

 
FEATURES OF NRE A/c

.01  ELIGIBILITY

An NRI can open and maintain an NRE account which needs to be opened by the NRI personally. A power of attorney can not open an NRE account.

.02 TYPE Of ACCOUNTS           

Savings, Current, Recurring Deposit or Fixed Deposits.

.03 MODE OF DEPOSIT 

Foreign Exchange transfer from abroad ; transfer from  account holder's or other NRI's NRE/ FCNR  Account held with another bank or by deposit of foreign exchange  during NRI's visit to India.

.04 PERIOD                                    12 months to 120 months.

.05 JOINT HOLDING                    Two or more NRIs can hold joint account.

.06 REPATRIATION                    Principal & Interest-both Fully Repatriable.

.07   INTEREST

Rate linked to the LIBOR being notified by Reserve bank of India from time to time.

Compounded quarterly.

.08   LOANS

Available to account holder as well as third party resident in India.    

LOANS IN INDIA-To ACCOUNT HOLDER : For business, investment in shares & securities, purchase of house property for own residential purpose and any other personal purpose subject to a maxi. of INR 10 mn.

LOANS IN INDIA-To 3RD PARTY : For personal or business purpose  subject to a maxi. of INR 10 mn.

LOANS OVERSEAS : Fund based/ non fund based facility for any bonafide purpose.

.09 TRANSFERS

 Transfer to NRE/FCNR Account of the account-holder or any other NRI permitted.

Gift to Resident/NRI permitted [POA cannot make a Gift on behalf of an NRI]

.10  ATTORNEY

An attorney can operate an account but can not open the account, make gift,  transfer funds to another NRE Account nor remit abroad .However an attorney can withdraw for local payments or remittance to the account holder himself through normal banking channels provided specific powers are granted.

.11  NOMINATION     -    Permissible.

.12 RENEWAL / TRANSFER

        .01 Can be renewed and easily transferred to account holder's another NRE / FCNR account. 

         .02  Transfer to another NRI's NRE / FCNR account permitted.

        .03 Transfer abroad by way of remittance - Allowed.

The account can also be shifted from one bank to another bank in India.

.13 PREMATURE  WITHDRAWAL         

Permissible - However, For period of less than 12 Months - No Interest payable -  After 12 moths subject to specified penalty.

.14 EXCHANGE RATE    At Banks Buying / Selling Rate.

.15   TAXABILITY 

            .01       Interest exempt from Income Tax.

            .02      Balance not subject to Wealth Tax.

            .03      No Gift Tax provisions in India. However w.e.f. 1-4-2006  amount received in excess of Rs.50,000 by way of gifts from persons other than specified relatives is included in donee’s income and chargeable to income tax.

.16  RETURNING NRIs

        .01   NRE account is to be redesignated as resident account immediately upon return, or

         .02    Funds  be transferred to Resident Foreign Currency (RFC) Account immediately upon return.

.17  PERMITTED CREDITS

a)     Remittances to India in any permitted foreign currency.

b)     Personal cheques drawn in foreign currency and/or  bank drafts drawn in foreign currency or Indian rupees drawn abroad.

c)     Foreign currency / TCs deposited by NRI during visit to India. Import of currency exceeding US$ 5000 and TCs of equal amount require a Currency Declaration Form(CDF)  

d)     Transfers from other NRE/FCNR accounts.

e)     Interest on Government securities and dividend on units of mutual funds, or any other income  provided the securities/units were purchased from NRE/FCNR account or out of inward remittance through normal banking channels on repatriation basis.

f)      Maturity proceeds of Government securities and units of mutual funds sold on a recognized stock exchange in India and sale proceeds of units received from mutual funds, provided the securities/units were originally purchased from NRE/FCNR account or forex remittances received from outside India on repatriation basis.

g)     Refund of share/debenture subscriptions to new issues of Indian companies  provided subscription was paid from NRE /FCNR account or forex remittance .

h)     Refund of advance of property, together with interest, if any (net of income tax  provided the original payment was made out of NRE / FCNR account or forex remittance from abroad.

i)      Any other credit if covered under general or special permission granted by Reserve Bank.

.18   PERMITTED DEBITS  

        a)      Local disbursements .

         b)      Remittances outside India.

         c)      Transfer to NRE/FCNR accounts of the account holder or another NRI.

         d)      Investment in shares/securities /commercial paper of an Indian company or for purchase of immovable property in India permitted under FEMA.

         e)     Any other transaction if covered under general or special permission granted by the Reserve Bank.

.19  DECLARATION OF AMOUNT

         In Currency Declaration Form (CDF)4 where applicable.