NRE Account (Non Resident External Rupee)

[Desi]

NRE Fixed Account FAQ link to ICICI bank website

NRE Savings Account FAQ link to ICICI bank website

Reserve Bank of India Link

Another RBI Link

[Desi]

NRE accounts are maintained in Rupees by NRIs with remittances from abroad that are in foreign currencies.

NRE accounts can be savings or Fixed Deposits

The Interest earned on NRE accounts is exempt from Indian tax and reporting in India for NRIs.

Interest earned on NRE accounts may be taxed in your country of residence

USA expects interest earned on NRE accounts to be reported on tax forms. Not reporting this is US tax law violation.

The Indian bank will most likely not issue form 1099 (that is a US form)

When reporting Indian interest on form 1040 or schedule B, you do not have to attach any bank statements.

Indian bank statement will provide information on interest earned

Indian bank may provide you with an Interest Earned Certificate.

GOI expects that you close NRE account as soon as you return for residency in India (not tour or vacation) or get the NRE account redesignated to a resident account

Any NRI can open this account. Their status in a foreign country (USC, GC, H1B) has no bearing.

Any NRI can open and maintain this account irrespective of PIO, OIC (or OCI) or none of those.

The amounts from NRE accounts are repatriable. The bank upon request will convert the money into the foreign currency and remit the money back.

If the total amount in your foreign bank accounts and financial instruments exceeds $10K, tehn you are required to file by US law, form TD F 90-22.1 (Not filing this form carries very severe penalties)

.

[r2i_0809]

Hi All:

I have been trying to find out if there is an easy way to withdraw funds from the NRE account and still be able to repatriate them later.

Here is the process I am going through currently with ICICI. I send an X amount of money by power transfer into the NRE account at ICICI. Then do a fixed deposit for 1 year 1 day with ICICI (this is the minimum term of FD). And take a loan on 90% of the FD amount. (There are terms and conditions attached to all these loans - like can't loan this amount for interest, use it for Real Estate transactions etc. However, the manager mentioned that you will not be asked on how the loan proceeds were used.) The loan amount is operated/withdrawn from an NRO account.

At the end of FD term, if the loan is repayed, the money can be repatriated. This is the part that I have not yet done. The earliest FD that I have done expires in September, 2007. ICICI NRI cell manager he local branch that I deal with, mentioned that this is most hassle free way to make sure that the funds are repatriable.

I am not sure if there is another way. I was told that you can transfer funds from an NRE account directly to someone else using a check. And when you ready to repatriate, get a statement from a CA (CPA) indicating how you used the funds, how much capital gains/profits/interest you earned, pay taxes and ask for repatriation of the funds. You need to give a check/DD and you will be given a DD in dollars (I think). But I have not yet met/talked to anyone who has DONE this.

Thanks,

Indy

[Desibabu19]

Sure taking a loan would work. Of course you will pay more in interest than you will earn as interest.

Am curious though, what is the purpose of this withdrawal? If you can be specific, perhaps you may get meaningful replies.

[RavC]

For this year, I got a 1099-INT for my Citibank NRE account !! I have been having an SBI NRE account for the past 6 years and have never received a 1099-INT. I had opened the Citibank NRE account last year (2006) and this year promptly they send me a 1099-INT. I called up Citi phone and they tell me that they are governed by IRS regulation and have to issue a 1099-INT. I was of the idea that interest accruals in NRE accounts are tax free. Further since the account is being maintained in India, why do I have to pay taxes on the interest in US?

Anyone knows why? Anyone else also in the same boat?

[Desi]

[quote] For this year, I got a 1099-INT for my Citibank NRE account !! I have been having an SBI NRE account for the past 6 years and have never received a 1099-INT. I had opened the Citibank NRE account last year (2006) and this year promptly they send me a 1099-INT. I called up Citi phone and they tell me that they are governed by IRS regulation and have to issue a 1099-INT. I was of the idea that interest accruals in NRE accounts are tax free. Further since the account is being maintained in India, why do I have to pay taxes on the interest in US? [/quote]

Because it is the law! You can choose to abide by law or break it.

NRE account interest is Indian income tax exempt (i.e. tax free) to a non resident of India.

A US resident is taxed on global income by US IRS. Hence US government expects you to pay taxes on global income whether or not you receive a 1099.

This means the interest earned in an NRE account is taxable by US government and is to be reported. If you do not have 1099, then you state the name of the bank and location and specify amount of interest in schedule B, which you are required to submit.

[r2i_0809]

Yes. There is a differential in the interest rate earned vs paid. The reason for withdrawing the funds would be to buy something like, plot of land. Or loan to someone/ a business for a much higher interest rate.

Indy

Sure taking a loan would work. Of course you will pay more in interest than you will earn as interest.

Am curious though, what is the purpose of this withdrawal? If you can be specific, perhaps you may get meaningful replies.[/quote]

[Desi]

Yes. There is a differential in the interest rate earned vs paid. The reason for withdrawing the funds would be to buy something like, plot of land. Or loan to someone/ a business for a much higher interest rate.

Indy[/quote]

When you transmit dollars to your NRE account, you do not get the spot rate on foreign exchange, so there is some loss. Then when you take a loan from bank against this as collateral you perhaps lose a few percent there because of the differential. Then when you repatriate, once again you do not get the spot rate and you lose some amount again. The basic transaction of buying a plot or loaning money to someone costs you perhaps 3 to 5%. So if the bank is lending to you say at 9%, you really have to make about 12% to to recover the costs associated with double conversion of foreign exchange ($ to Rs and back to $) This does not figure the Foreign exchange risk you are taking. Once you figure some compensation for forex risk, you need to make quite a bit on loaning the money.

If you are buying a plot, you do not need to borrow the money from the bank, you can buy with your own NRE funds and as long as that is well documented, you will be able to repatrate as this has been liberalized.

Unless, the return is assuredly significant and long term this way of investing has costs. On the other hand if one is not looking for repatriation, then by all means.



In my opinion, for this to be

[mumbaikar]

Hello All,

I want to open a NRE account with State Bank of India.

On the form I have to mention the SBI branch, which is little confusing.
On the remittance choices, they have mentioned "SWIFT enabled" banks and also branches with WIRE transfer facility.

I want to know which one is better choice. Branch with SWIFT enabled facility or Branch which has wire transfer facility.

Which one is faster?

Thanks,
Mumbaikar

[r2ifan]

Folks,

Is there a consolidated web-site that provides up-to-date current interest rates that are being offered by various Indian banks for all types of FD accounts

NRE / FCNR / NRO / FD / Indian Citizens, etc.

I found best offer rate quote @ Nrilinks.com. But that seems stale.

This will help in deciding which bank to approach whenever we have funds.
Instead of having to go through web-sites of each bank to find what rate they're offering.

Thanks for any pointers,