The below content is purely for informational purposes and is not intended to constitute advisory of any kind. Please note, these are in-depth articles which are best viewed on large screen devices like laptops, desktops and tablets. The position reflected in this article has been updated as of January 15, 2024.
Many Non-Resident Indians (NRIs) work and live overseas; however, they still have families living in India. They may want to send money to their near and dear ones regularly, to manage local expenses and also make investments in India.
A Non-Resident External (NRE) account is the answer to their needs.
It is a bank account suitable for NRIs, Persons of Indian Origin (PIOs) and Overseas Citizens of India (OCIs), who wish to use their foreign earned income to manage expenses and investments in India. It is an Indian Rupee (₹) denominated account, i.e., it is maintained in Indian Rupee. The money deposited in foreign currency in this account is automatically converted to the equivalent Indian Rupee (₹) by the bank as per the prevailing currency conversion rates. There is no upper limit on the account balance that can be maintained in an NRE account.
A key benefit of an NRE bank account is that the credits in an NRE account can be freely repatriated, i.e., funds can be transferred to an overseas account without any upper limit. The repatriable funds include both the principal amount and the interest earned on this account. Furthermore, the interest earned on the money deposited in this account is tax-free in India, i.e., income earned through the account is exempt from income tax.
Did you know?
As per prevailing FEMA regulations, NRIs who qualify as Indian residents must close their NRE account
You can also open an NRE Recurring Deposit (RD) account and an NRE Fixed Deposit (FD) account, which will allow you to make a recurring or a lump sum deposit from your NRE savings account. Permissible tenures for ICICI Bank customers for both, range from one to 10 years. The tenure may vary from bank to bank. Upon maturity, both the principal and interest amount from the FD and RD are deposited into the NRE account from which they were invested. Such maturity proceeds deposited into the NRE account are freely repatriable.
A common question that NRIs have is, funds of which origin can be deposited into an NRE account and which payments can be made from an NRE account. Based on prevailing Foreign Exchange Management Act (FEMA) regulations, here is a quick list of funds that can be credited/debited from an NRE account.
Funds that can be deposited in an NRE account
Remittance from your overseas account or transfer from NRE/Foreign Currency Non-Resident Bank (FCNR (B)) account
Funds from your NRO account up to USD 1 million. (As applicable on capital income, i.e., proceeds from maturity of FD, sale of property and redemption of mutual funds and shares)
Current income earned in India, such as rent, dividend, pension and interest, among others;
Interest accruing on the balances in the account and earned on investments made from the account in India;
Maturity proceeds of investments made from the NRE account.
Payments that can be made from an NRE account
Outward remittances from India;
Payments in India, such as for managing family expenses, among others;
Transfer to your own NRE/NRO/FCNR (B) accounts;
Investments in India, such as mutual funds, shares of listed companies, fixed deposits and real estate, among others
Features of an NRE account
Please note, tables are best viewed on desktops and in landscape mode on mobile phones.
Who can apply for an NRE account?
Only NRIs/PIOs/OCIs can open an NRE account. Under the prevailing FEMA regulations, you will be considered an NRI if:
Funds from this account are freely repatriable (i.e., NRIs can transfer the funds to their overseas account without any limits).
Tax on NRE account
Income earned in the account is exempt from income tax. If your physical cash deposits/withdrawals in one or more accounts during the Financial Year amount to ₹2 million or more, it is mandatory to possess a PAN card. If you do not have a PAN card, you should initiate the process of applying for one.
*Relative is defined under section 2 (77) of the Companies Act, 2013. This includes their parents (including stepparents), son (including stepson), son’s wife, daughter, daughter’s husband, siblings (including stepsiblings), and children.
**The term ‘former’ or ‘survivor’ basis refers to the condition where only one of the two joint account holders that is the former account holder can primarily operate the account. The 'survivor' can only operate the account after the 'former' passes away.
***The list mentioned is indicative and are not exhaustive. These may differ from bank to bank. You may want to consult your bank for more details.
Did you know?
As per prevailing FEMA regulations, NRIs who become Indian residents again must convert their NRE account to a resident bank account.
When can an NRI open an NRE account?
Once you have become an NRI/PIO/OCI under prevailing FEMA regulations, you can open an NRE account as follows:
After moving abroad: Once you have moved overseas, you can either visit your bank's nearest overseas branch or you can download the NRE account application form and submit an offline application to your local overseas branch or send it to designated bank branches/offices located in India. Please get in touch with your relationship manager for further details.
Before moving abroad: Banks like ICICI Bank also allow individuals such as professionals transferred abroad, students with admission to a foreign university, and seafarers, to open an NRE account with the requisite documentation. You will need to visit your bank's nearest branch, fill up an NRE account opening form and submit the requisite required documents.
Find your nearest ICICI Bank branch here: Branch Locator
Alternatively, you can also visit your bank’s website and follow the instructions to open the account online.
The account opening process and timelines vary across banks. Please speak with your bank’s relationship manager to know more details.
You can use an NRE account to deposit your foreign earnings. It is a rupee-denominated account, suitable for expenditures and investments in India. Having an NRE account provides you with several benefits, including tax-free interest income in India and the ability to repatriate funds without any limits. You should speak with your bank to know more about opening an NRE account and understand the permissible debits/credits.
Frequently Asked Questions
Can an NRI maintain all three: NRE, NRO, and FCNR (B) accounts simultaneously?
Yes, an NRI can maintain all three accounts simultaneously. He/she can use a combination of these accounts to manage banking and investment, depending on the income sources and financial needs.
What can a joint holder, Power of Attorney (PoA), mandate holder do while operating an NRE account?
Joint holder: As per the Reserve Bank of India (RBI), a resident relative can be a joint holder on a ‘former or survivor’ basis and can operate the account as a PoA holder during the lifetime of the NRI/ PIO account holder.
To know more about what a joint holder can do, click here.
Mandate holder: A mandate holder can operate the NRI account locally. They can issue cheques for local payments, open Fixed Deposits (FDs) and execute other instructions except:
- Closing FDs
- Repatriating funds to third party
- Gifting funds
To know more about what a mandate holder can do, click here.
PoA holder: The authority of PoA for account operations is limited to making withdrawals for permissible local payments or sending money to the account holder through regular banking channels. So, they can issue cheques, remit funds, avail loans, manage insurance premiums and make investments on the NRI's behalf.
To know more about what a PoA holder can do, click here.
Can an NRE account have a PoA or mandate holder, who is not a joint holder to operate the account?
Yes, an NRE account can have a PoA or mandate holder, who is not a joint holder to operate the account.
Can NRIs make investments in Indian mutual funds, equity and debt markets, FDs and Public Provident Fund (PPF), and buy property from an NRE account?
Yes, NRIs are allowed to make investments in Indian mutual funds, equity and debt markets, FDs or buy property from NRE accounts, but they are not allowed to make new investments in PPF. However, they can continue to hold their PPF account that was opened as a resident till maturity.
Can an NRI receive maturity proceeds or sale proceeds of Indian MF, equity and debt markets, FDs, PPF, and sale of property in an NRE account?
Yes, as per RBI regulations, you can receive the maturity proceeds if such an investment is made from your NRE account.
Can an NRI appoint any resident Indian as a mandate holder? Do they need to be a joint holder in the account?
Yes, you can appoint any resident Indian as a mandate holder who may or may not be a joint holder.
Are proceeds from the redemption of mutual funds, sale of shares, sale of property, etc., made from an NRE account subject to income tax?
Tax treatment on redemption of mutual funds, sale of shares, sale of property, etc., is similar for residents and NRIs. Any income earned from investments is subject to short and long-term capital gains tax, depending on the asset class and its holding period.
Are there any transaction charges or withdrawal limits on an NRE account debit card?
Yes, there is a daily cash withdrawal limit at ATMs on your NRE debit card. Banks also have a limit on daily purchases on merchant websites and retail outlets. This withdrawal and transaction limit on your NRE debit card varies from bank to bank. You may also incur currency conversion fees and international transaction charges while using your card abroad. There are other charges, such as ATM withdrawal fees, annual renewal fees, issuance fees and replacement card fees applicable.
Please note, you can use your NRE debit card both, domestically and internationally.
Recommended For You
The contents of this article/infographic are meant solely for informational purposes. The contents are generic in nature and are not intended to serve as a substitute for specific advice on any matter whatsoever. The information is subject to updation, completion and verification and the applicable norms may keep changing materially from time to time. This information is also not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to applicable laws or would subject ICICI Bank Limited/its affiliates to any licensing or registration requirements. ICICI Bank Limited/its affiliates and their representatives shall not be liable for any direct or indirect losses or liability incurred arising in connection with any decision taken by any person on the basis of this content. Please conduct your own due diligence and consult your financial advisor before making any decision. Terms and conditions of ICICI Bank and third parties apply. ICICI Bank is not responsible for third party services. Nothing contained herein shall constitute or be deemed to constitute an advice, invitation or solicitation to avail any products/ services of third parties.