In terms of Clause 4(ii) of Section 10 of Income-tax Act, 1961, any income from interest on monies standing to the credit of NRE accounts is exempt from income-tax.Likewise, balances held in such accounts are exempt from Wealth-tax in terms of Section 6(ii) of Wealth-tax Act, 1957. Gifts made to close relatives in India from out of balances in such accounts are also free of Gift tax.

NOTE:
Tax exemptions referred to above are available only in respect of NRE accounts maintained by NRIs and not for those maintained by OCBs.