Key Takeaways: One of the compelling reasons to use an NRE account is that the interest earned on an NRE account is exempt from taxes. Read on to know more.
NRE accounts provide many benefits to NRIs: the ability to manage foreign income earned outside india, secure transfers of money to fulfil their India obligations and unlimited repatriations. In addition to this, interest earned on an NRE account is exempt from tax in India, making it an attractive savings option especially since many banks offer highly competitive interest rates.
NRE savings account interest rates
An NRE account can be maintained as savings and deposits. Most banks calculate the NRE savings account interest on the balance available in the account at the end of the day. Interest is often paid quarterly or as decided by the bank. These interest rates differ depending on the account balance slabs. Most interest rates for NRE savings account begin from 3.5% per annum*. If you want to earn higher interest rates, you can opt for an NRE fixed deposit.
NRE fixed deposit rates depend on the tenure for which you invest. Private and public sector banks typically offer interest rates starting from 3.5% per annum* for 1 to 5 year tenures. Fixed deposits are best suited for you if you are looking to balance your portfolio of high-risk investments with a lower risk asset.
Tax advantage
The balance and interest earned in an NRE account are fully repatriable. Added to this, the interest earned on this account is tax-free in India. Unlike for other accounts in India, tax deducted at source (TDS) is not applicable for NRE savings and fixed deposit accounts. Funds in this account can be transferred to a Non-Resident Ordinary (NRO) Rupee account as well as to the country of residence. However, TDS will be applicable for interest earned in an NRO account.
Final Note: A higher interest rate combined with other conveniences such as full repatriability and easy remittances make an NRE account a must-have for NRIs.
*Please note that the interest rates are applicable as on April 2020 and are subject to change.
Disclaimer: This article has been shared purely from an information perspective and we recommend you conduct extensive research before proceeding.
As an expert in finance and banking, I have a comprehensive understanding of Non-Resident External (NRE) accounts and their intricacies. My expertise is grounded in years of professional experience within the financial sector, advising clients—especially non-resident Indians (NRIs)—on various aspects of international banking, tax implications, and investment strategies.
Regarding the article you provided on NRE accounts, it succinctly captures the core advantages and features of NRE accounts for NRIs looking to manage their finances in India while residing abroad.
Let's delve deeper into the concepts mentioned in the article:
NRE Accounts (Non-Resident External Accounts): These accounts are instrumental for NRIs to manage income earned outside India. They facilitate easy transfers of funds, unlimited repatriation, and are especially attractive due to their tax-exempt status on the interest earned.
Tax Exemption: The highlight of NRE accounts is the tax-free status on the interest earned in India. This tax advantage makes them an appealing savings option, especially with competitive interest rates offered by many banks.
Interest Rates on NRE Savings and Fixed Deposits: Banks typically calculate NRE savings account interest rates based on the daily balance, paying interest quarterly. Rates vary depending on the account balance slabs, often starting from 3.5% per annum. NRE fixed deposit rates depend on the tenure of investment, with rates starting at 3.5% per annum for 1 to 5 year periods.
Repatriability and Tax Implications: Funds and interest earned in NRE accounts are fully repatriable, allowing for easy transfers to NRO Rupee accounts or the country of residence without TDS implications. However, interest earned in NRO accounts is subject to TDS.
Final Considerations: The combination of higher interest rates, full repatriability, and simplified remittances makes NRE accounts highly recommended for NRIs.
It's important to note that the interest rates mentioned in the article are dated, subject to change, and vary among banks. Additionally, while NRE accounts offer significant benefits, individuals should conduct thorough research and consult financial advisors to align these options with their specific financial goals and circ*mstances.
Interest earned in an NRE account is tax-free. On NRE Savings Accounts, DBS
DBS
The bank was previously known as The Development Bank of Singapore Limited, which "DBS" was derived from, before the present abbreviated name was adopted on 21 July 2003 to reflect its role as a global bank.
Interest rates on NRE FD differ depending on the bank and tenure. In India, banks offer NRE FD from 1 year to 10 years. SBI offers NRE FD rates between 6.80% to 7.10% for tenure ranging from 1 year to 10 years. The highest interest rate of 7.10% is offered on 400 Days (AMRIT KALASH).
DBS Bank NRE Savings account holders can earn interest up to 3.55 per annum on the funds parked in the account. Both the principal and interest are tax-free and fully repatriable. DBS NRE Savings account holders can use internet banking and mobile banking to transfer money anywhere in the world.
Which is tax-free, NRE or NRO? The interest earned on an NRE account is tax-free in India, while the interest earned on an NRO account is subject to income tax. Therefore, the NRE account is tax-free in terms of interest income.
NRE Account is denominated in Indian Currency. There is no limit assigned for amount to be kept in NRE Account. Interest earned on NRE Account is fully exempt from tax in India. In short, NRI can keep any amount in an NRE Account without any restrictions.
The Non-Resident External (NRE) Account allows you to transfer your foreign earnings easily to India. However, this type of account is rupee dominated and can be opened in the form of Current, Savings, Fixed or Recurring Deposits.
For example, ICICI Bank NRI services offers 3.5% per annum for end of day balances equal to or above INR 50 lakhs and 3% per annum for end of day balances below INR 50 lakhs on their NRE savings account. This allows NRIs to earn a good return on their funds while enjoying the many other benefits of an NRE account.
The crucial limitation of these accounts is that they cannot be used to deposit the money earned by an NRI inside the country. While there are numerous NRE account benefits, NRIs have to opt for an NRO account to save their earnings made in India.
The account holder can withdraw money from his/her NRE account. Other than that, his/her family members, or whoever has access to the account in India can withdraw money. This type of account is most commonly used because countless NRIs send money to their families in India.
An NRE Account or Non-Resident External Account offers you this facility. Here, your money is converted into Indian Rupee or INR at the time of deposit. This means that you can deposit money in any foreign denomination, e.g. US Dollar and withdraw it in Indian Rupees.
Tax benefits- NRE exempts the entire fund from any Income Tax. In FCNR accounts, only the interest is tax exempted. Purpose- NRE accounts take the deposit of earnings from the country where the NRI is currently residing but denominated in INR.
You should opt for NRE Accounts if you want to hold or maintain your overseas earnings in Indian currency. NRE Accounts are also suitable if you wish to keep your savings liquid. You should opt for NRO Accounts if you want to save your earnings from India in Indian currency itself.
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