NRE account vs NRO account: How curiosity earnings is handled underneath earnings tax legal guidelines
2 min readMy son went to US final month to take up an employment and thus has grow to be a non-resident underneath FEMA. Does he should open an NRE account? How an NRO account is completely different from an NRE account?
Answer: Once an Indian resident turns into a non-resident underneath the provisions of FEMA, he has to intimate his financial institution about change of his residential standing. The banks then re-designates all the present financial institution accounts as NRO accounts. Generally, there aren’t any restrictions in respect of the cash which might be deposited in your NRO account. You can even open a brand new NRO account after turning into a Non Resident underneath FEMA. Up to 1 USD million might be remitted each monetary yr out of your NRO account, after paying relevant taxes in India.
An NRE account is an account which an individual can open after turning into a non-resident underneath FEMA. NRE account might be maintained in both Indian foreign money or in any permitted international foreign money. There are restrictions in regards to the cash which might be credited in an NRE account. Generally, cash remitted, by means of banking channel, from outdoors India can solely be credited in an NRE account. Money in NRE account is totally repatriable outdoors India. An NRE account is just about a checking account maintained outdoors India although truly maintained with Indian banks.
As far as taxation is anxious, curiosity earned on an NRE account is totally exempt underneath Section 10. However, curiosity credited on NRO account is totally taxable in India and the banks are required to deduct tax at supply on the curiosity credited on all NRO checking account together with a saving checking account.
Balwant Jain is a tax and funding professional and might be reached on jainbalwant@ gmail.com and @jainbalwant on Twitter
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