3 Types of Bank Accounts an NRI Can Open in India

Apr 01, 2022

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Living outside our home country is challenging, and managing the finances abroad and in India can put additional stress if you do not have the right information. If you are a Non-Residential Indian (NRI) or Person of Indian Origin (PIO), most of your income will be in foreign denominations like US Dollar, European Union Euro, British Sterling Pound, Japanese Yen, Australian Dollar, etc. You can have different banking needs for which you need a bank account in India. This article elucidates different types of bank accounts that NRIs can open in India to fulfil their different banking needs.

An NRI is an Indian citizen who lives outside India for 182 days or more in a financial year for employment or business. The Foreign Exchange Management Act (FEMA) mandates the NRIs to maintain an NRI Account to carry out financial transactions in India. Most leading banks in India offer special NRI Accounts for Non-Residential customers. These accounts offer several facilities and benefits that match the requirements of the NRI customers and can be maintained in the form of rupee or foreign currency accounts. An NRI may need a bank account in India to transfer money earned outside India to the domestic account and invest or transact here in India. Or, they might need it to manage the money earned in India. NRIs need to open different bank accounts for different banking needs.

An NRI Account is a bank account opened by a Non-Resident Indian (NRI) or a Person of Indian Origin (PIO) with a bank or financial institution which is authorised by the Reserve Bank of India (RBI) to provide various services.

Here are the types of bank accounts an NRI can open in India:

  1. Non-Resident (External) Rupee Account (NRE account)

  2. Non-Resident (Ordinary) Rupee Account (NRO account)

  3. Foreign Currency (Non-Resident) Account (FCNR account)

1. Non-Resident (External) Rupee Account (NRE account):

A Non-Resident (External) Rupee Account (NRE Account) is a rupee-denominated bank account that can be in the form of a Savings Account, Current Account, Recurring Deposit Account, or Fixed Deposit Account. It can open by an NRI by remitting the funds. If required, they can assign someone in India the operating powers of their account.

As the money is remitted in India through legal means, it can be freely used for any legitimate purpose. The account can be converted to a normal resident account if the account holder returns to India and becomes a resident of India. The NRI status is changed to resident status only when their stay exceeds 182 days. Although the banks have the freedom to determine the interest that is paid on the principal amount deposited in NRE Accounts, it cannot be more than the interest offered on the domestic deposit accounts.

3 Types of Bank Accounts an NRI Can Open in India
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Here are some key pointers for NRE Account:

  • Since these accounts are maintained in Rupee, the foreign currency deposited is converted to Indian Rupee at the prevailing foreign exchange rates

  • The main purpose of this account is to save money you earned abroad

  • The principal amount and the interest are fully transferable

  • The money deposited or credited plus the interest earned on NRE deposits are non-taxable in India

  • Any close relative, whether NRI or Resident Indian, can be added as a joint account holder. However, if the Resident Indian is a joint holder, the mode of operation of the account will be 'Former or Survivor'

2. Non-Resident (Ordinary) Rupee Account (NRO account):

 

Non-Resident (Ordinary) Rupee Account (NRO Account) is a type of Current or Savings Account that helps an NRI to manage the income that is earned within the boundaries of India. When a resident individual leaves for a foreign country to take up employment, their regular resident bank account is converted into an NRO account. The NRI can manage this account from outside India. The account can also be used for converting existing savings into a foreign currency. Although the banks have the freedom to determine the interest that is paid on the principal amount deposited in NRE Accounts, it cannot be more than the interest offered on the domestic deposit accounts.

Here are some key pointers for NRO Account:

  • Since these accounts are maintained in Rupee, the foreign currency deposited is converted to Indian Rupee at the prevailing foreign exchange rates

  • The main purpose of this account is to house the funds you earned from the sources that originated from India. For example, the rent, pension, dividend income, etc. can be deposited into the NRO Account, and it can also be sent abroad

  • Any close relative, whether NRI or Resident Indian can be added as a joint account holder. However, if the Resident Indian is a joint holder, the mode of operation of the account will be 'Former or Survivor'

3. Foreign Currency (Non-Resident) Account (FCNR account):

Unlike NRE and NRO, the FCNR Accounts are not rupee-dominated. They are opened by transferring a freely convertible foreign currency, such as USD, Pound, Euro, Australian Dollars, etc. Only an NRI can be a joint holder for the FCNR Accounts. These accounts can be operated in perpetuity, but a fixed term is assigned for operating these accounts. The time periods allowed for these accounts are as follows:

  • 1 year and above but less than 2 years

  • 2 years and above but less than 3 years

  • 3 years above but less than 4 years

  • 4 years and above but less than 5 years

  • Five years

Here are some key pointers for FCNR Account:

  • The FCNR Account is opened and maintained in foreign currency only.

  • The principal and the interest amount in an FCNR Account are fully transferable.

  • The money deposited or credited plus the interest earned on NRE deposits are non-taxable in India.

  • The FCNR Account is opened for a fixed-term and they are not operated in perpetuity.

To Conclude:

It can be challenging to manage finances spread across multiple NRI Accounts and keep track of them. Understanding the features and benefits of these different NRI Accounts will help you choose the right account based on your need.

 

Warm Regards,
Ketki Jadhav
Content Writer



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