As an NRI, earning in foreign currencies offers plenty of financial benefits. However, these individuals also face a situation of maintaining a rupee account back home. This is normally the issue, when it comes to repatriating funds earned overseas or investing India based earnings in the country itself. In this case, there is an option of opening a NRI account, between the NRO and NRE account.
There are similarities between both accounts. For one, both accounts can be opened as savings as well as current account. Additionally, both can be held in Indian rupee accounts. At the same time, a minimum amount of Rs.. 75,000 must be maintained on a monthly average in both the accounts.
But while both accounts come under the same category, there are considerable differences between both accounts. For one, the NRE account tends to be more flexible as compared to the NRO account. Given below are the different features of the account of NRE and how you can make the most from investing in it:
Freely repatriable: As compared to the other NRI accounts, the NRE account is freely repatriable. This is applicable to both the principal amount as well as the interest that is earned in the account. Therefore, if you need to make any payments in your local country, you can always withdraw funds from the account for NRE.
Tax free treatment: One of the main drawbacks of investing in most investment options is the taxation. Depending on the investment vehicle and the amount that one would need to invest, the respective taxation amount will be calculated. In the long run, one would spend immense amount of funds just on taxation as opposed to saving. But one benefit offered by the NRE account is that it is taxation free. In other words, there is income tax, wealth tax or even gift tax applicable to the NRE account, which is applicable to the NRO account. Therefore, you can benefit from investing in this account, especially long term.
Deposit of rupee funds generated in India: The NRE account can only be used to invest funds that have been earned abroad. Therefore, any income, pension or even proceeds of any sale from abroad can be invested in this account. However, no income that is earned in India such as salary, dividends, or rent can be deposited in this account, but only in the NRO account. However, the funds from the NRO account can be transferred in the account for NRE.
Joint Holding: When it comes to joint holdings, the NRE account can be held jointly with another NRI. However, it cannot be held with another resident Indian.
From the above mentioned factors, you can see why the NRE account makes for the best investment option for any NRI. This is especially beneficial for individuals who want to park their overseas earning remitted to India, especially if you want the funds to be converted into the Indian rupees. This is also beneficial for those who want to keep the funds liquid, especially if it wants to be freely repatriable.