Nro and nre accounts

Tax queries 3734 views 10 replies

CA.Varalakshmi.M

Manager-Finance

482 Points Joined February 2012

Hi friends ,

One of my clients is NRI.He wants to come INDIA and stay here for lessthan 182 days to retain his NRI status.Morever he wants to work here for these 180 days for which he gets salary.His salary will be taxable here only, as income accruing and arising in INDIA.

My question is

In which account he needs to deposit his salary.what is NRO and NRE accounts.

What is tax rate on his income.

Please suggest me.

Replies (10)

PRITAM JAIN, CA , CS

Practising CA CS

398 Points Joined September 2007

There are two options an NRI interested in opening a bank account in India can choose from – an NRE or an NRO account. Are you an NRI keen on getting a bank account opened in India? Then it would be advantageous to know how these two types of accounts differ and which one is right for you.

The Government of India has permitted NRIs to open rupee accounts in India in order to repatriate funds from their home countries. The two most common accounts are the NRE and NRO accounts. Let’s take a closer look at them.

What’s an NRE account?

A Non-Resident External (NRE) account is a bank account that’s opened by depositing foreign currency at the time of opening a bank account. This currency can be tendered in the form of traveler’s checks or notes.

What’s an NRO account?

A Non-Resident Ordinary (NRO) account is the normal bank account opened by an Indian going abroad with the intention of becoming an NRI. An NRI can also open this account by sending remittances from his home country or by transferring funds from his other NRO account. It offers the same facilities as an NRE account, except that any repatriation done through this account should be reported to RBI by filling up prescribed forms.

How do NRE and NRO accounts differ?

Funds remitted from overseas sources or local funds that would otherwise have been sent to the accountholder abroad can instead be transferred to NRE Accounts. On the other hand, local funds that aren’t eligible to be remitted abroad must be credited to an NRO account.

Can you transfer funds fromanNREto anNROaccount and vice versa?

It’s easy to transfer funds fromanNREto an NRO account. But it’s not possible to transfer funds from an NRO account to an NRE account. Once you transfer funds fromanNREtoanNRO account, the amount is non-repatriable. Consequently, you cannot transfer it back.

What’s the difference in the tax treatment for interest earned on an NRE and an NRO account?

The interest earned on any type of NRO bank as well as the credit balances in this kind of account are taxed under the account holder’s tax bracket. On the other hand, interest earned on the NRE account is totally exempted from income tax, and the credit balances in the account don’t attract any wealth tax. Any gift given to a close relative doesn’t attract gift tax.

Manish Negi

Expert

394 Points Joined March 2012

Thanx for sharing info, Sir

CA.Varalakshmi.M

Manager-Finance

482 Points Joined February 2012

Thanks for your reply.

Can you please suggest me on tax implications of this NRI.

Can we have any tax plannings?

PRITAM JAIN, CA , CS

Practising CA CS

398 Points Joined September 2007

Definitely

But that will require complete details of the assessee.

Regards

CA.Varalakshmi.M

Manager-Finance

482 Points Joined February 2012

My Client (Doctor)has been staying in USA,now he wants to practice here in India.

Hence, he wants try out here for about six months with leading hospitals

He is green Card holder with Indian Passport. He is eligible to get his American Citizenship, in about 2 years.

Salary/Consultation fees, earned by him will be taxable in INDIA

How can he avoid taxation of same income in USA ?

What more precautions he should take to safe guard his income, from being overtaxed ?

Student

875 Points Joined May 2010

good info

NITIN

96 Points Joined September 2010

I agree with Mr. PRITAM JAIN , except with the statement that Transfer from NRO To NRE is not possible. Last week the Finance minister had annaounced that Fund transfer from NRO to NRE is allowable.....so please remind it that both transfers are posiible now..

PRITAM JAIN, CA , CS

Practising CA CS

398 Points Joined September 2007

Thanks for sharing Nitin, I didnt know this.

Manoop V M

Chartered Accountant

65 Points Joined August 2009

Dear Experts ,

Could you pls guide me regarding the procedure of trnsfer of Funds from NRO account to NRE account....

Rammohan

255 Points Joined April 2012

Thanks, Mr. Nitin for the additional information. It would help if you could give reference to the press note or other report carrying the FM's announcement.

Could you also please enlighten on whether there has been a follow-up official notification on transfer of money from NRO to NRE accounts?

Thanks.