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On my recent visit to the bank, I was told that money coming into the NRE account can only be foreign currency and for NRO accounts, the money can come in local currency but has to be a valid source of income (e.g. rent or investments in India).

Now if we use 3rd party remittances like Remitly or Transferwise etc, they usually covert the foreign currency into local currency like INR and then deposit it.

How can we achieve this in either NRE/NRO accounts? If not, what are the other options ?

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On my recent visit to the bank, I was told that money coming into the NRE account can only be foreign currency and for NRO accounts, the money can come in local currency but has to be a valid source of income (e.g. rent or investments in India).

Yes this is correct as per FMEA regulation in India.

Now if we use 3rd party remittances like Remitly or Transferwise etc, they usually covert the foreign currency into local currency like INR and then deposit it.

The remittance services are better suited for transferring funds to Normal Savings accounts of your loved ones. Most remittance services would transfer funds using a domestic clearing network [NEFT] and hence the trace that funds originated outside of India is lost. There could be some generic remittance that may have direct tie-up with some banks to do direct transfers.

How can we achieve this in either NRE/NRO accounts? If not, what are the other options ?

You can do a Wire Transfer [SWIFT] from US to Indian NRE account. You can also use the remittance services [if available] from Banks where you hold NRE Account. For example RemittoIndia from HDFC for an NRE account in HDFC, or Money2India from ICICI for an NRE account in ICICI or QuickRemit from SBI etc. These would preserve the history that funds originated from outside India. Similarly you can also deposit a Foreign Currency Check into Indian Bank Account. The funds would take around month or so to get credited.

All other funds can be deposited in NRO account.

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  • You mentioned that most remittance services would transfer funds using a domestic clearing network and that the trace is lost. Does this mean that the amount is not considered as a gift if sent to parents ?
    – Viraj
    Jan 25 '16 at 8:50
  • If there is scrutiny of say bank account, all Credits are by default treated as income. The account holder has to explain the source and what is income or not. Thus If there is a credit to your parents savings account either from outside or one could be India and transfer funds to parents, it does not matter. If the amounts are large a paperwork showing it as gift is advised. Alternatively your parents can be joint holders and operate the account and withdraw funds for expenses.
    – Dheer
    Jan 25 '16 at 9:15
  • Is getting a citi bank account in US and citi bank NRE/NRO account in India advisable ? Do you have any personal suggestions ?
    – Viraj
    Jan 25 '16 at 9:20
  • @Viraj Nope I don't have any personal suggestions. The Bank Account in US can be with any Bank as Most remittance services can debit any US account via ACH Debits. It would be easier if your remittance service provider and the NRE account in India are same financial institutions.
    – Dheer
    Jan 25 '16 at 10:18

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