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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.
Table of Contents
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.
The following are the different kinds of NRI bank accounts that the
Non-Resident Indian (NRI) / Persons of Indian Origin (PIO) can open:
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
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.
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
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that is withdrawn is less or more than the actual deposit.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.
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.
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.
Also, Read: Money Transfer from Overseas / NRIs to India.
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.
The following are the documents required for opening an NRE/NRO account in India:
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.
See your Recommendation: Are you an NRI? Know the Tax Rules.
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