Know the rupee accounts NRI

IT HAS almost become a necessity for nonresident Indians (NRIs) to keep a banking channel active in their home country. Some need it to remit money to support their family members. For others, money in such accounts enables them to try out investments. Some NRIs use these accounts to buy real estate. The NRE and NRO accounts are two important banking channels for NRIs. Each banking channel has its own set of advantages and disadvantages. NRIs or persons of Indian origin (PIO) should be clear about these.

NRE Accounts

These accounts can be opened by NRIs, PIOs or even overseas corporate bodies (OCBs). NRE accounts can be operated by any of these parties and could be in the form of a savings account, recurring account or even in the shape of a fixed deposit. Deposits have to be made by NRIs, OCBs or the PIOs through remittances in foreign exchange. The interest on NRE accounts is exempt from any tax, and is fully repatriable. The withdrawals from NRE accounts in India can be carried out by the person holding the power of attorney (PA) to operate the account. The redemptions/income out of mutual fund investments made out of NRE account is allowed to be credited to the same account. The NRE account holder also has the privilege to withdraw the balance in foreign currency at any time. For property purchased out of funds in the NRE account, following regular remittances in foreign currency to the account, only an amount equivalent to the cost of acquisition of the property is repatriable. However, if the sale proceeds of the property are in rupees, no repatriation can happen through the NRE account (it can happen through the NRO account). This is because no deposits in rupee are allowed in this account.

NRO Accounts

These are the accounts in which the deposits can be made by NRIs /OCBs/ PIOs through remittances in foreign currency. The person holding the power of attorney to operate the account in India can also deposit funds in Indian currency in these accounts. These accounts are ideal for all such NRIs who have some recurring income like rent from property, or income from some other source which still exists in India.
The NRI can ideally use the NRO account to get credit of all the proceeds out of sale of any property in India. However, in case of NRO accounts, all the interest on balance held is subject to taxes unlike the NRE account. Also, the interest is not repatriable outside India to the account-holder. But funds deposited in the NRO account from sale of property are allowed to be to repatriated to the extent of the cost of acquisition (remitted in foreign exchange). For any repatriation out of the account, the NRI needs a PAN card.