Today, there a number of Indians working abroad. Therefore, the banking services catering to the transfer of funds, savings, earnings, investments, and repatriation of Non-Resident Indians have grown tremendously.
Banking laws for NRIs allow for the following deposit schemes, or simply put, accounts with authorized dealers -- banks and financial institutions authorized by Reserve Bank of India to deal in foreign exchange -- to be maintained in Indian rupees and in foreign currency:
- FCNR -- Foreign Currency Non-Resident Account
- NRE -- Non-Resident External Rupee Account
- NRO -- Non-Resident Ordinary Rupee Account
The special features for the above mentioned accounts are:
FCNR Accounts
These accounts are only for term (fixed) deposits with the maturity ranging from one year to three years.
NRE Accounts
NRE accounts are opened in Indian rupees and all foreign exchange deposits received for credit of these accounts are first converted to Indian rupees at the buying rates by the banks.
NRO Accounts
A bank account, held by a person designated as NRI, in India is designated as an Ordinary Non-resident Account (NRO Account).
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FCNR Accounts |
NRE Accounts |
NRO Accounts |
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Currency used:
Pounds Sterling
US Dollars
Japanese Yen
Euro
Features:
- Accounts only for term deposits ranging from one year to three years.
- Principal, as well as interest, earned on these accounts is transferable outside India in the same currency or in other convertible currency.
- The interest, earned on these deposits, is exempt from Indian Income Tax.
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Currency used:
Indian rupees (all foreign exchange deposits received need to be first converted to Indian rupees at the buying rates by the banks)
Features:
- Withdrawals in foreign currency are permitted provided The Indian rupees in the account are converted to foreign currency at the selling rate. This conversion loss is to be borne by the account holder.
- Deposits and their interests are free of Indian Income-tax.
- The entire credit balance (inclusive of interest earned accumulated) can be repatriated (send back) outside India at any time without requiring permission from the RBI.
- Local disbursement from the accounts can be made freely.
- Account holders can avail of loans/overdrafts from banks against security of fixed deposits in their NRE accounts.
- The balances in the accounts are free of Wealth-tax and gifts to close relatives in India are free of any Gift-tax.
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Currency used:
Indian rupees
Features:
- Accounts can also be opened with funds deposited from abroad.
- As funds in this type of account are non-repatriate, they cannot be deposited abroad to the account holders or transferred to their NRE Accounts without the Reserve Bank's prior permission.
- Interest earned on these deposits is not exempt from Indian Income-tax.
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Some important facts that you should know about such accounts:
- NRI accounts cannot be opened/ operated by a Power-of-Attorney holder in India on behalf of the NRI: However, the latter can operate the accounts for the purpose of local payments to be made on behalf of the NRI account holder. The Power-of-Attorney holder is not permitted to make gifts from these accounts and is not allowed to make remittances outside India.
- NRIs can invest in shares and securities of Indian companies, government securities, etc. NRIs can invest in units of domestic mutual funds and deposits with Indian companies, immovable properties in India, and proprietorship/ partnership concerns in India.
These investments can be done using a NRO or NRE account. However, an important point to remember is that if you use an NRO account, the funds sourced from any investments cannot be repatriated. This problem is solved by using a NRE account.
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