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I’m an NRI currently living in the UAE, but I recently started doing some work for an Indian company on a consulting basis. The company will be paying me in Indian rupees into my Indian bank account.
I already have an NRE savings account, and I was wondering whether I can simply give that account to the company for receiving the payment.
I’ve read that NRE accounts are mainly meant for money earned outside India and that income earned in India is normally handled through an NRO account. But I’m confused about what exactly counts as “income earned in India.”
In my case, the work is being done partly from the UAE, but the company paying me is based in India and the payment would be in INR. I also have some rental income from an apartment in India, so I’m trying to understand whether that can go into the NRE account as well.
Would I need to use an NRO account for the Indian salary/consulting income and keep my NRE account only for overseas earnings?
Has anyone dealt with a similar situation after becoming an NRI? I’m especially interested in how banks actually handle Indian salary, consulting income, rent and other payments into NRE versus NRO accounts.
The RBI's account guidance is useful here. For an NRE account, permissible credits include things such as inward remittances from outside India, interest, transfers from other NRE/FCNR(B) accounts and certain investment proceeds. RBI also specifically says that current income such as rent, dividend, pension and interest can be credited to an NRE account, subject to the applicable conditions.
That doesn't mean every type of income earned in India can automatically be credited to NRE.
For NRO accounts, RBI specifically permits inward remittances as well as legitimate dues in India, and identifies current income such as rent, dividend, pension and interest as permissible credits.
So I would not assume that an Indian salary or consulting payment can be treated the same way as foreign salary remitted to NRE.
Your situation also has a tax angle because the place where services are performed and the nature of the engagement can matter. I'd get the bank's NRI team to confirm the FEMA/account treatment before giving the NRE account details to the Indian company.
From what I understand, I wouldn't use the NRE account as a general-purpose account for all Indian income.
When I changed my accounts after becoming an NRI, my bank explained that NRE and NRO accounts have different permitted credits. The NRE account was primarily used for my overseas earnings/remittances, while Indian-source income was handled through my NRO account.
That distinction became important because I also had rental income in India. The bank told me to route that through NRO rather than treating it like an overseas remittance.
For your consulting payment, I'd ask the bank specifically how they classify that income based on where the services are performed and your tax/FEMA circumstances. I wouldn't decide purely based on the fact that the payer is an Indian company.
The fact that the payment is in rupees doesn't by itself answer the question either. The source and nature of the income matter.
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I had a similar question when I started receiving professional income from India after moving abroad.
The bank asked me to distinguish between money earned outside India and income arising from India. My NRE account was kept for funds coming from overseas, while my Indian receipts were handled through NRO.
One thing that caused confusion for me was assuming that because I was an NRI, every payment I received personally could go into NRE. That isn't how the account rules work.
I would also keep your rental income separate from the consulting/salary question. Rental income from Indian property is a different category of income, and RBI expressly lists rent among current income that can be credited to NRO.
If the company is actually paying you for services performed in India, I would definitely ask the bank before routing it to NRE. Keep the agreement/invoice and payment description available in case the bank asks about the source of funds.