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Guide to the Types of NRI Bank Accounts in India

The banking and investment requirements of a Non-Resident Indian (NRI) or a Person of Indian Origin (PIO) are different as compared to that of a resident Indian as they reside outside India and most of their income and savings are in foreign denominations. Thus, this is important to have the right bank account that suits their requirements. Keeping in mind their banking and investment needs, they are allowed to open bank accounts out of the fund remitted in India or from the income earned in India. This guide talks about the different kinds of NRI banks accounts in India that can be opened easily by NRIs or PIOs.

What is an NRI Bank Account in India?

An NRI Account refers to the accounts opened by Non-Resident Indian (NRI) or a Person of Indian Origin (PIO) with banks and financial institutions, authorised by Reserve Bank of India (RBI).

Many of the major banks and financial institutions in India offer facilities of opening NRI Accounts, which give numerous benefits with respect to transferability, currency denomination and tax benefits to NRIs and PIOs to manage their wealth in India.

Types of NRI Bank Account

The following are the different kinds of NRI bank accounts that the Non-Resident Indian (NRI) / Persons of Indian Origin (PIO) can open:

• Non-Resident Ordinary Account (NRO)
• Non-Resident External (Savings) Account (NRE)
• Foreign Currency Non-Resident (FCNR) Fixed Deposit Account
• Resident Foreign Currency Account (RFC)

Non-Resident Ordinary Account (NRO)

NRO account allows a person to manage their income earned from their employment in India. It is rupees denominated account that can be opened in the form of saving, current, recurring deposit or fixed deposit.

When an Indian citizen goes aboard for employment with the intention to stay there, it is legally essential that the person gives intimation to the bank for the conversion of his saving account into an NRO account.

This type of account is subject to tax deducted at source (TDS), which means that the principal and interest earned can be repatriated only after deduction of applicable taxes.

Non-Resident External (Savings) Account (NRE)

NRE account is an account opened in India in name of an NRI to park his foreign earnings. This means that the account allows the individual to transfer foreign currency earned outside to their bank account in India.

One should keep in mind that the NRE Accounts are prone to exchange rate fluctuations. There might be a situation where the money that is withdrawn is less or more than the actual deposit.

There is tax exemption for this type of account and interest is also exempted for the purposes of tax. This means both the principal and interest earned are tax-free and can be repatriated to India without any restrictions.

Difference between NRE and NRO Account

Basis	NRO Account	NRE Account
Meaning	Account to manage income earned in India	It is an account to transfer foreign income to India
Taxability	Interest earned in Taxable	Interest earned is tax free
Repatriability	Funds in NRO account are repatriated after payment of applicable taxes.	Money from NRE account is freely repatriable i.e., both principal and interest if freely transferable.
Joint Account	Can be open by NRI jointly with an Indian citizen	It can be opened by NRI only
Exchange Rate Risk	Not prone to Risk of currency rate fluctuations.	Prone to Risk of currency rate fluctuations.

Foreign Currency Non-Resident (FCNR) Fixed Deposit Account

In this account, an individual can keep foreign currency in the same denomination in order to not get affected by the exchange rates in the country. This type of account is kept as a fixed deposit account.  The currency in this account is in the denomination of Pound Sterling, US Dollar, Japanese Yen, Euro, Canadian Dollar and Australian Dollar. It is to be noted that the entire deposit i.e. the principal and interest are tax free until NRI status is held.

Resident Foreign Currency Account (RFC)

It is an account maintained by the NRIs when they return back to India, in foreign currency. This account allows parking of any foreign currency. One of the main features of RFC account is that the account can be converted into NRE/FCNR account if the status of account holder changes from resident to non-resident again.

An RFC account can be opened by a person who is resident in India receiving foreign exchange from his employer abroad or by liquidating assets which were acquired when he was an NRI and repatriated to India.

Benefit of NRI Bank Accounts

As an NRI, it is important to know the available benefits of NRI Bank Accounts in India in order to manage income and investment effectively and efficiently.

• Repatriation Advantages: NRI accounts have Repatriation benefit. Both NRE and NRO account allows smooth flow of fund. Funds in NRE accounts are freely repatriable whereas repatriation in NRO is subject to tax deduction.
• Balance requirement: There is no need to maintain high minimum balance requirement. Most of the bank has significantly dropped its minimum balance requirement to as much as Rs 10,000.
• Easy opening: Another advantage of NRI accounts are that it can open easily with only minimum mandatory documents. Most of the banks provide facilities to open NRI account without visiting branch in India.
• Investment benefit: NRI bank accounts allow the account holder to invest in Mutual Fund by linking their account with Investment saving account.

Documents Required to Open NRI Bank Accounts

The following are the documents required for opening an NRE/NRO account in India:

• Photocopy of passport.
• Photocopy of Visa.
• Address Proof of Foreign Residence – Utility bills, passport copy with foreign residence address, driving license photocopy or any other relevant document as a proof of address to foreign residence.
• All the copies shall be attested by Embassy of India or any other overseas banker.
• Self-attested Passport size photograph – by signing across the photograph.
• Work Permit /Authorisation Letter for work in the foreign country
• Birth Certificate
• Marriage Certificate
• OCI Card

Conclusion

NRIs need to know their requirement, and the kind of financial transactions and income they are going to have in future before opening these accounts. One can opt for an NRO account, if total income includes income earned in India and want to manage it from India. An NRE account can be opened if individual want to transfer foreign income in India and avoid taxation liabilities. FCNR account is a Fixed Deposit Account andan NRI can choose to open any of these Bank accounts according to their banking requirements. Thus, opening of NRI Bank account helps Non-Resident Indians (NRI) or a Persons of Indian Origin (PIO) to send their earned income to India and at the same time, to retain their income from India in their home country.