I have been employed recently in a company in Bahrain & was residing in India till a month back. I had a savings account in India. Below are my queries:
1. What is the easiest way to transfer funds to India (25K per month)from my BD account in Bahrain to an savings account in Mumbai in a bank which is not the same bank as mine?
2. Is it mandatory to park my funds in an NRE account to avoid tax?
3. Since my prime requirement is to send funds to India, is it necessary that I do it through an NRE account only? There are many exchange centres in Bahrain where BD is accepted over the counter & remitted to any branch in India within 24 hrs. If that is the case, what is the main purpose of an NRE account & what is its significance?
4. I have also heard through friends that any savings account in India needs to be converted to an NRO account as soon as the account holder visits a foreign country for an indefinite period (in my case for an employment). If that is not done, then it is considered to be illegal. How true is this statement?
5. What in your opinion is the best way to transfer funds to India?
6. Please let me know the exact mechanism on how NRO & NRE Accounts Work.
05 July 2010
The safe and economical way to transfer the funds to your account in India is to make a wire transfer to your designated account in India. The transferer bank will ask for the details like SWIFT code of the bank in India, please get the same.
It is not mandatory to send the funds to NRE account. But it is desireable as in your case the income earned by way of interest is exempt from Income Tax under section 10. All will depend on your overall income status etc.
There is no problem if you use the private exchnges except as above.
NRE/ FCNR accounts give you flexibility to transfer the forex denominated funds out of India, no questions asked. Interest on such accounts is not subject to tax.
Please make a search for FEMA and NRI accounts in google to study more about such acccounts. I will send you the link if I come across.
CAclubindia
