Non Resident Indian Bank Accounts in India

It is observed that many of the professionals are not updated about the types of accounts maintained by NRIs or Non Resident Indians in India. Hence, In our this edition of Newsletter we are covering Types of account maintained by NRIs.

NRO Accounts may be opened/ Maintained in the form of rupee denomination and can be in the form of Current, Savings, Recurring or Fixed Deposit Accounts. Only Residents can hold the Account jointly. Anyone can transfer any amount into NRO account even a Resident can also transfer funds to the NRO account of Non Resident.

Characteristics & Features of NRO Account.

  • The existing accounts of Indian Nationals can be designated as ordinary non‐resident accounts depending on their residential status
  • Interest payable on NRO accounts is the same as on resident account However, rates of interest vary from bank to bank.
  • Amount held in NRO cannot be repatriated except for the below:
  • Current Income like Rent, Salary or other current income
  • Up to USD 1 Million per financial year, for any bonafide purpose out of the balances in the account.
  • On Interest earned on balances in NRO A/C Income Tax is deducted at sour
  • Balance held in NRO account cannot be repatriated and no remittance in foreign currency is allowed without prior approval of RBI. Hence, money stays “as it is”in India

Characteristics & Features of Non Resident External A/C

  • An NRE A/C is a savings or current account held in India that allows the account holder to repatriate funds that come from outside earnings and transfer earnings to India conveniently and
  • Money transferred to an NRE A/C is converted to Thus permitting to maintain foreign currency earnings in INR. The account holder may repatriate all the funds along with the interest earned at any point of time without having to pay tax on the interest amount. No Wealth tax shall Apply.
  • Any NRI can open an NRE acco However, No money can be deposited from India to such account.
  • There can be two or more joint holders provided all the holders are non‐ resident person from Indian or
  • On his becoming resident in India, NRE account will be designated as resident rupees account or converted to RFC account as per the option of the account However, it won’t apply for short visits
  • The NRO account cannot be converted into NRE Acco Also funds can’t be transferred from NRO to NRE account without a special permission from RBI and proof of all existing funds required, which is a complex procedure than opening a new NRE account.
  • Term deposits for one year and above made by non‐residents carry interest at rates higher than those available to residents in India
  • Conversion loss during Credits & withdrawals in Foreign Currency into INR is to be borne by the account Further, India has high exposure to exchange fluctuation risk.

 Characteristics & Features of Non Resident External A/C

  • FCNR account is maintained only for Term Deposits. The account can be maintained only in Pound, Sterling, USD, Deutsche Mark, and Japanese Yen.
  • The interest and the repayment of the deposit are also made in the same foreign currency in which the account is maintained.
  • The depositor may at his own will, obtain repayment in INR, converted at the buying rate on the date of repayment.
  • In this account, deposits are made for a period of 1 to 5 years, There is penalty for Premature withdrawal.