A savings bank account is necessary for all to park the surplus funds and get risk-free returns in the form of interest. Anyone who earns an income through salary or any other means can benefit from opening a savings account as it helps them keep the money safe rather than holding liquid cash at home.
However, for NRIs (Non-resident Indians), the savings bank account needs differ from that of a resident Indian. To cater to the NRI’s banking needs, the banks provide a specific savings account service known as the NRE (Non-Residential External) account. It is similar to the regular savings account for resident Indians, except it offers a higher interest rate and other benefits.
What is an NRE Account?
An NRE account is a type of bank account that is specially designed to cater to NRIs. It can be maintained only by the NRI, and the payments in the account can be credited only from a foreign country either through RTGS or drafts. However, withdrawals are permitted both within and outside India.
Benefits of NRE Account
- One of the key differences between the NRE and the regular savings bank account is that the interest earned on the deposits held in the account is exempted from tax, which means you get high-interest savings. In the regular savings bank account, the interest earned is subject to TDS (tax deducted at source) if the interest earned in a financial year exceeds Rs. 10,000, it is taxed.
- Based on your changing needs, if you have an NRE account, you can transfer the funds to an NRO account. However, it is advisable not to do so as the interest you may earn from NRO (Non-resident Ordinary) accounts are taxable; TDS will be applicable.
- Another significant benefit of holding an NRE account is that the funds you hold in the account are totally repatriable (both the principal amount and the interest earned), which means you can send the money to any country outside India.
- You can hold an NRE account either in the form of a savings account, or an FD (fixed deposit) account. The interest rate offered by the bank for the NRE account is generally higher than the interest offered to resident Indians.
- You can open a joint NRE account with any bank of your choice in India. However, the only condition to open a joint account is that the other person must also be an NRI. You can open a joint account with your spouse, children, or parents.
- Most banks in India do not have any restrictions on the number of transactions you can carry out in a day. This means you can deposit money in your NRE account without worrying about maximum limitation.
- The NRE account is an ideal account for the NRIs who have an income in a foreign but wish to park the funds in Indian Rupees. NRE account also gives you better liquidity than other types of NRI bank account; you can easily withdraw the amount from your account at any time you want without any restrictions.
Thus, with the benefits mentioned above, it is obvious why most NRIs prefer opening an NRE account. Apart from offering your high-interest savings, it also gives you better liquidity and hassle-free banking experience.