As an NRI who is earning in foreign currency, you have plenty of financial opportunities regarding investments and even conversion into the resident currency. However, before you can utilise your foreign earnings, you first need to deposit it in the ideal and government acceptable medium, namely the NRE account.
This NRI account stands for the Non-Resident External account, with emphasis on the ‘external’ factor. As an NRI or a PIO, you can open this account, and invest your foreign earnings in it. The following are the features of the NRE accounts and how you can benefit from it:
Features of an NRE Account:
Tax-free account: This is one of the main benefits of the NRE account. As an earning member, the last thing you would want is to let all your hard earnings get cut due to taxation. However, the earnings in this account is not a tax. This tax-free feature applies to both the principal and the interest earned. In this way, you get to earn funds without any worry about taxation.
Fully repatriable: At some point in time, or even on a monthly basis, you may want to repatriate your funds. While this process may be seemingly complicated, you can get to remit funds abroad from the account without any headaches. Moreover, unlike the NRO account, there is no cap to the amount on the repatriation or any evidential requirement from your CA if you exceed a particular amount for repatriation.
Higher interest rates: As compared to the residential bank accounts, the interest rates for the NRE accounts are considerable higher. Added to the fact that you will be earning in a foreign currency which has a high currency conversion, it makes for an ideal investment. This is especially crucial if you have a steady and high income with a requirement to remit on a regular basis.
Power of attorney: Managing your NRE account may be tedious. But you can always appoint a mandate to operate the account on your behalf. This will ease off the burden on your back while allowing the funds to be transferred to the appropriate party, especially if it is for your family member in your home country. You only need to inform your bank about a power of attorney and take the necessary steps to appoint a mandate.
Investment can be made from this account: While the value of the foreign currency is high abroad, the financial market conditions of India are quite favourable for investments. Foreign funds are a good way to get a promising return, especially if the funds from the NRE account can be used. Once the funds are invested in the account, you can invest the appropriate funds in appropriate sources, such as the Indian mutual funds and stock.