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Nre Bank Accounts – All You Need To Know
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We are living in the age of multinational corporate organisations and business outsourcing. Travelling on the job and multi-year secondments have become a reality of work-life today. But as an Indian passport holder, living abroad and earning foreign currency, you are not allowed to deposit funds into your regular savings account. This is because you are regarded as a Non-Resident Indian for the period that you are living and earning abroad. As an NRI, you must maintain a separate bank account known as an NRE account. Here’s all you need to know about this type of bank account.
NRI definition and the need to open this account
Not every Indian who travels for work abroad is classified as an NRI. However, a transfer is considered more permanent if you have to live abroad for a period exceeding 6 months, precisely 183 days in a calendar year. In such a case, you must get in touch with your bank and inform them about the change. To be able to access your savings in the foreign land, you can either convert your regular savings account into an NRE account or open a new NRE account altogether. The NRI status applies not only for work, but also if you choose to migrate to a foreign country, and have some roots in India.
The need to convert the account
Government laws mandate that you cannot continue holding your local savings account upon assuming NRI status, which is why you need to convert it to NRE bank account. In most cases, when you transfer to a foreign country for work, your salaries are paid in foreign currency. While you may be provided with a local bank account to manage your expenses there, you may want to put away some savings into your Indian account. These savings can be transferred to your NRE account. With the NRE account, you can deposit sums in different foreign currencies including USD, GDP and EUR among others.
NRE savings accounts and taxation laws
Another reason to your convert your regular account into an NRE bank account is taxation laws. If you spend less than 183 days in India in a given year, you become exempt from paying taxes in your home country. On the other hand, you are treated as a resident Indian if you don’t make the change, which means you cannot benefit from any tax exemptions. In this case, you have to pay taxes on your global income in accordance with the tax laws of India.
That said, if you opt for tax exemption in India, you have to pay taxes in the country you are spending more than 183 days in a calendar year.
The sums parked in NRE accounts are always maintained in INR. While you may deposit funds in a foreign currency, the sums are always converted to INR. Accessing funds in your NRE savings account is akin to accessing them in your regular bank account in that you can send and receive funds easily or transfer them from one account to another and so on. However, you have to bear currency conversion rates whenever funds are deposited or withdrawn from this account.
Final Words: The greatest advantage of NRE savings account is that it promotes a lot of savings. You get great NRE account interest rates. Furthermore, you do not have to pay any taxes on the savings deposited or interest earned on your savings parked in this account, making it a great money saver
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