NRE Account Rules

As per the regulations of RBI, a non-resident Indian cannot open a regular resident savings account, and the account should be converted to an NRI account before one assumes the NRI status.

Therefore, it is essential to have the right to open a non-resident external or non-resident ordinary account to do any banking transactions in India. Nevertheless, depending upon the requirement of PIO and NRI, the person can either open one NRO/NRE account or both.

We will discuss about different RBI guidelines defined for NRE Account Rules throughout this article.

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Difference Between NRO and NRE Account Rules

NRO and NRE accounts will help non resident Indians like you to keep your money safe. It gives you seamless access to it. Each account will come with a different objective.

NRE will stand for non-resident external and allow you to deposit funds that you can earn abroad in a foreign bank note. Nevertheless, you can use a non-resident ordinary account to manage your funds and income produced in India in Indian currency.

1.Tax imposed 

There is a difference between NRO and NRE accounts in that the interests produced on the non-resident external account are tax-free in India. However, you need to pay income interest to earn from your non-resident ordinary saving account in India.

2.Deposits and withdrawals

A non-resident external account will allow you to deposit in foreign currency. Nevertheless, the non-resident ordinary account will allow you to deposit INR. But, it enables deposits in other notes as well. You can also make withdrawals in INR from NRO accounts and NRE accounts. 


You may want to use a non-resident external account if you have a family in India and wish to provide them. It will also make your remittance transactions seamless. The account will allow you to get a better interest rate than what is prevailing in most developed countries. 

You may apply for a non-resident ordinary account when you want to get your income deposited from India. It could be rented from your residential property and fixed deposits in India. 

4.Holding structure 

You can hold one NRE account with one NRI family member. You can also have a joint account holder in the survivor or former mode of operation. You can have an NRO account with one NRI family member and relative living in India. 

We will guide you with the use cases of the NRO and NRE accounts. 

You are going to have the requirement for an NRE account as follows. 

  1. You want to withdraw your overseas earnings and convert them to Indian currency. 
  2. You are going to make some repatriable investments in Indian stocks.  
  3. You want to open an account that allows free repatriation on any note.
  4. You are going to have the requirement for an NRO account as follows. 
  5. You want to receive your income in India.
  6. You want to hold your Indian earnings in Indian currency. 
  7. You want to open a joint account with someone living in India. 

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Can I have both an NRE and savings account? 

Yes, someone can have both NRE and a savings account. If you have any income arising in India, you can get it in a non-resident ordinary account. If you have earnings abroad, you can open an NRE account. Nevertheless, some restrictions apply to fund transfers from NRE and savings accounts, although they belong to the same person. 

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Is it mandatory to convert savings to an NRE account?

If your current residency status changes to NRI, the law mandates you to restore your savings fund to an NRO account. You might get penalties levied. It applies if you fail to convert the account to an NRO account. There are three main types of NRI accounts that you can select from. FCNR (foreign currency non-resident) only converts existing savings to an NRO account once you become an NRI.

You can also choose your current resident savings and go for a new NRE account that complies with your banking needs. After all, you want more, and tax-free interest on your NRE savings term. 

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Can an NRI keep a typical savings account? 

The moment your residential status changes to NRI, some regulations and rules get imposed on your finance application or may get changed. Starting from the bank account to the properties, you may hold a different status. Here is what the law says when you get the NRI status. 

Most residents will misperceive achieving a resident savings account even after becoming an NRI. Nevertheless, the law does not allow it.

All Income Tax that is receivable in India like the rentals from the pension, property, and rentals should be deposited in the account. Any payment to EMI on a loan or insurance premium that you get in India needs to mandate from the NRO account.

This is why you need to inform the bank of your NRI residential status within a reasonable time. Although there is no specific period to inform the bank, the term should not extend more than three months.

The bank will designate your existing residential account to the NRO account and your payment will continue as it is. Alternatively, he will have an option to close the resident savings account and open a new one if you want to change the bank. 

You need to be mindful that if you want to continue with an NRI savings account, and it gets noted, you will get penalized for the same. Funds from the NRO account are repatriable for up to 1 billion dollars.

Nevertheless, there is a catch. you will need to get a certificate from the chartered accountant for tax payment as applicable based on your income in INR. 

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What’s the penalty for keeping savings accounts and deposit accounts as an NRI? 

Continuing to hold resident savings after gaining an NRI status is seen as illegal by the FEMA guidelines. If any individual fails to adhere to the guideline, he needs to pay a penalty of three times the amount involved in an existing resident savings account. It would amount to somewhere 200000 with the amount not quantifiable. This is one of the important point in NRE account rules.

Additionally, you need to pay a penalty of about five thousand every day from the first day of intervention until the fine gets paid. 

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Frequently Asked Questions (FAQs)

Q1: What is the full form of NRE?

Ans:- The full form of NRE is non-resident external.

Q2: What is the full form of NRO account?

Ans:- The full form of NRO account is Non Resident Ordinary Account.

Q3: What are the documents needed to convert your NRO account?

Ans:- Here are the important documents needed to convert NRO account:-

  • FEMA Declaration form 
  • A copy of your pan card
  • Closure form of your resident bank account 
  • Bank application form for an NRI
  • Passport size photo 
  • Residence address abroad
  • Copy of your passport
  • Copy of your work permit/ valid visa form/ PIO or OCI card

Q4: How can you restore your resident report to an NRO fund? 

Ans:- These are the steps to restore resident report to an NRO Fund:-

  • You need to fill out forms to convert your existing savings account to an NRO account. 
  • You need to get into your bank and ask about the conversion cycle.
  • You can get an application form and download it from the bank site. 
  • The account holder needs to fill out all the essential details.
  • Be ready for the documentation process. 
  • If you have a fixed deposit (FD) linked to the account, be sure to attach a receipt of the same.
  • You need to submit the form with the documents at the bank branch if you are in India.
  • If you have left the country, a copy of the same should get shipped to you. It gets sent after being attested by the Indian embassy. 

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Final Words !

We have tried our best to highlight all points related to the NRE Account rules and regulations associated with NRE and NRO Account and why to open these accounts. We will try to come up with more blogs like this, till then stay tuned.

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