Category Archives: NRI

Know the different types of NRI Accounts in India

A Non-Resident Indian (NRI) or Person of Indian Origin (PIO) can open different types of bank accounts in India, depending upon their liquidity and investment requirements. Further, the type of bank account being opted for may also depend upon the repatriation requirements of the account holder. One can make an informed decision in this respect, only after knowing about different options available.

Here are different categories of accounts an NRI/PIO can open in India:

1.Non-Resident External (NRE) Account (Savings Account/Fixed Deposit)

NRE Accounts are rupee-denominated accounts, wherein the NRIs/PIOs can deposit their money in foreign currency and park such amount in Indian account. An NRI/PIO can open such an account in his/her name solely, or open a joint account with another NRI/PIO. In such accounts, one can deposit the funds in foreign currency which is converted into the Indian currency upon deposit at prevalent foreign exchange rates and credited to the account. Thereafter, the account holder can freely withdraw the money in domestic currency. However, no rupee credits are allowed in such accounts, as such accounts accept only the foreign currency credits. To further add to the utility of NRE Accounts, the account holder is free to repatriate the account balance outside the country without any limit. This means that you can freely transfer the principal amount deposited and also the interest earned on such deposit. Further, the interest earned by the NRIs on NRE Savings and Fixed Deposit Accounts is tax-free in the hands of the account holder.

2.Non-Resident Ordinary (NRO) Account (Savings Account/Fixed Deposit)

NRO Accounts are rupee-denominated accounts, wherein the NRIs/PIOs can deposit their Indian as well as foreign incomes. Such incomes can include interest income, rental income, dividend, pension, etc. An NRI/PIO can open such an account with ‘Single’ operations or operate a joint account with an NRI/PIO or even a resident. The account holders can credit the account with Indian currency as well as the foreign currency. In case of foreign currency credits, the funds are converted into the Indian currency at the prevalent foreign exchange rates. The account holder can freely withdraw the money in domestic currency. However, in terms of repatriability of the account balance, the account holder can repatriate the interest earned but is restrained from transferring the principal balance beyond the limits specified under the Foreign Exchange Management Act. The interest earned by the NRIs on NRO Savings and Fixed Deposit Accounts is also taxable in the hands of the account holder as per the Income Tax laws.

3. Foreign Currency Non-Resident (FCNR) Fixed Deposit Account

NRIs/PIOs can also invest in FCNR Fixed Deposit Accounts, wherein the funds invested continue to be maintained in foreign currency, unlike the rupee-denominated NRE/NRO Accounts stated above. Accordingly, such accounts mitigate the foreign exchange risk for the account holders. However, such accounts can only be opened for a fixed tenure like normal Fixed Deposits. Both, the principal and the interest amount in FCNR (Bank) accounts can be freely transferred to foreign country. As per the prevalent Income Tax laws, the non-residents do not have to pay any tax on interest income through such accounts.

With different types of bank accounts and deposit options available, NRIs can opt for the account type best suiting their operations and investment needs.

Source- IciciBank

What are the benefits of having NRI Account

Top 5 Benefits of NRI Account

A Non-Resident Indian (NRI)/Person of Indian Origin (PIO) can open NRI Account as Non-Resident External (NRE) and Non-Resident Ordinary (NRO) Accounts, which will enable an easier and convenient fund transfer for him/her from abroad to India. Both of these accounts allow the amount in foreign currency to be credited in the account. However, NRE Account does not allow any rupee credits into the account and is, therefore, suitable only if one needs to transfer overseas income and funds in an Indian bank account. It also provides you with additional benefits like repatriability, preferential tax treatment, etc.

NRI Account Benefits:

• Convenient money transfers to India – Whether one has opened an NRE or NRO Account, one can deposit the income earned in overseas country in such accounts. Thereafter, the funds can be accessed through any bank branch in India as well. Accordingly, having an NRI Account in India is an easier mode of remitting money to India from overseas. Given the existing banking relationship, you can also expect competitive exchange rates for such funds transfer.

• Flexibility of repatriation of funds – The current regulations in India allow flexibility in the repatriation of the balance available in NRE Accounts, for both the principal as well as interest income. In simple words, the balance in NRE Account can be transferred back to the foreign country without any restrictions. However, in case you open an NRO Account, you can transfer the interest income earned in such account without any limit, but certain limits are applicable on transfer of the principal amount as per extant forex regulations in force.

• Better interest rates – The focus of the Central Banks across the globe has been to adopt the decreasing interest rate scenario, and in line with such philosophy, other banks provide very low-interest rates on the Savings Accounts. On the other hand, NRE Accounts in India tend to offer better interest rates. As such, an NRI Account can help you garner better returns for your surplus funds.

• Easier operations within India – An NRI Account allows you to perform banking operations easily within India, even while you may be staying abroad. The bank will generally allow you to register the operational mandate to allow the operations of the bank account on your behalf. Such a mandate can be registered for your parents, relatives, spouse, siblings, etc. A cheque book and ATM Card can also be provided to the mandate holder, to enable easy withdrawal of the funds. Further, an NRO Account can also allow you to open a joint account with a resident Indian, allowing joint operations.

• Tax exemption for NRE interest income – As per the prevailing tax laws in India, the interest income earned on NRE Accounts is not subject to Income Tax and thus remains tax-free for the account holder. Due to this exemption, the bank will not deduct any tax in respect of such interest income on NRE Savings Account or NRE Fixed Deposit. However, the exemption is applicable only for NRE Accounts and not for NRO Accounts. Accordingly, the bank will deduct tax at source for such interest income on NRO Accounts.

As such, NRIs can manage their money in a better manner through NRI Accounts and conveniently manage the fund transfer from abroad to India effortlessly.

Source: ICICIBank

NRE and NRO Accounts – Meaning, Comparison, Benefits, Taxation

NRE and NRO Accounts – Meaning, Comparison, Benefits, Taxation:

A Non-Resident Indian (NRI) may open an NRE Account or an NRO Account in India. While both accounts may be similar in a few features, they differ in some. As such, the selection of a suitable bank account is dependent upon the specific transaction requirements of the NRI. Let us discuss these bank accounts in detail.

NRE and NRO Account meaning:

NRE full form is Non-Resident (External) Account, which allows only foreign credits from outside India into the account. On the other hand, NRO stands for Non-Resident (Ordinary) Account. Such accounts allow both foreign currency credits from outside India as well as rupee credits from within India.

NRE and NRO Accounts comparison:

Here are some of the major points of difference between NRE and NRO Accounts:

Acceptance of Rupee Credits – As mentioned above, NRE Accounts do not accept rupee transactions from within India. On the other hand, NRO Accounts allow rupee transactions as well as foreign currency transactions. As such, if one wants to receive any amount from within India, NRO Accounts will be suitable for such persons, as against NRE Accounts.

Repatriability of Account Balance – NRE Account allows free repatriation of funds outside India without any limits. On the other hand, the interest income in NRO Accounts is freely repatriable, while the principal balance can only be repatriated up to specified limits.

Joint Operations – One can hold a joint NRE Account with another NRI. Also, in NRE Accounts, NRIs / PIOs can hold accounts jointly with a Resident relative on ‘former or survivor’ basis and the Resident relative can operate the account as a Power of Attorney holder during the life time of the NRI / PIO Account holder. On the other hand, you can hold a joint NRO Account with either a Resident or a Non-Resident.

NRE and NRO Account benefits:

Foreign Currency Remittance – Both NRE, as well as NRO Accounts, allow an individual to receive foreign currency credits from outside India. As such, one can open an NRI bank account and conveniently transfer funds into their account in India while staying abroad.

Mandate Holder – One can also appoint a mandate holder to the account, which adds convenience and accessibility to the operations in the NRI bank accounts. RBI has prescribed specific transactions for a Mandate Holder, hence it can be operated only with the permissible transactions.

Attractive Interest Rates – NRI bank accounts also allow better interest rates to the depositors, especially when compared to the foreign developed countries, most of which are operating on a near-zero or negative interest rates regime.

NRE and NRO Account Taxation

In terms of tax benefits, NRE Accounts enjoy tax exemption in respect of interest income on the bank accounts as well as Fixed Deposits. On the other hand, the interest income on NRO Accounts and deposits is subject to tax at applicable rates. However, one may avail of the benefit of Double Taxation Avoidance Agreements (DTAA). The DTAA benefits are subject to the relevant documentation being shared with the Bank and not by default.

While NRE Accounts offer repatriation and tax benefits, NRO Accounts are more suitable if one needs to accept rupee transactions. One may choose the account as per their specific transaction requirements.

Source- icicibank