NRI Bank Account – Types and Features

NRI Bank Account – Types and Features

Are you an NRI and are confused about opening an NRI bank account? Here is a quick guide on the different types of NRI bank accounts and their features.

Today, Indian banks allow the NRIs to manage their income from India and abroad through the NRI bank account. Anyone who qualifies as an NRI as per the Income Tax Act can open and operate an NRI bank account in India. There are three types of NRI accounts that a person can open, based on his/her specific needs – NRO (Non-Resident Ordinary) Account, NRE (Non-Resident External) Account, and FCNR (Foreign Currency Non-Resident) account.

If you are unsure which type of NRI account to open, then knowing their features can help you make the right choice.

NRO Account

The Non-Resident Ordinary Account helps you manage your income in India through rent, dividends from investment, pension, business operations, etc. You can keep your earnings in India in an Indian bank account in INR. If you have a business in India, the NRO account can be useful to make local payments.

Features

  • The funds deposited in the NRO account must be mandatorily earned in India. Money earned from foreign sources cannot be deposited.
  • The deposits and withdrawals can be made only in Indian Rupees.
  • Depending on your preference, you can open and maintain an NRO savings account or term deposit accounts like recurring deposits and fixed deposit accounts.
  • The funds held in the NRO account can be easily transferred to other NRO account.
  • The interest earned from the NRO account is considered an income, and it is taxed as per your usual tax slab.
  • You can open a joint NRO account with an Indian resident.
  • If you sign a letter of authorisation, referred to as a letter of mandate, then a local Indian resident can operate the account on your behalf.

NRE Account

This is another popular NRI bank account. It is useful if you are earning a living abroad and want to keep the amount in an Indian bank account. It allows you to easily transfer the foreign currency to your family members in India.

Features

  • The deposits made in the NRE account must be earned in a foreign country. It allows you to remit your earnings in currency to an Indian bank account, and the amount is converted into INR at the time of deposit as per the existing exchange rate.
  • The interest earned from the NRE account is fully exempted from tax. Additionally, the deposits held in this account are fully repatriable (both principal and the interest amount) to an NRO account or another savings account in the country of your current residence.
  • The deposits and withdrawals can be made only in Indian Rupees.
  • You can open this account as a savings account, fixed deposit, or recurring deposit account.
  • You can appoint a nominee to your NRE account. In the event of your untimely demise, the bank will remit the full amount in your account to the nominee.
  • You can open a joint NRE account.

FCNR Account

As the name suggests, the Foreign Currency Non-Resident Account allows you to hold your foreign earnings in the same currency. This account is useful to avoid the loss that you may incur due to fluctuation in the exchange rates.

Features

  • The deposits are made in specific currencies only, including – British Pound Sterling, Euro, Japanese Yen, Australian Dollar, American Dollar, etc.
  • The interest accrued on the FCNR account deposits is paid in the same currency as the currency of deposits.
  • The interest earned from this account is fully exempted tax under the Indian Income Tax Act.
  • This account can be opened only as a term deposit – fixed deposit, which means the account comes with a lock-in period.

David Lockhart