According to the guidelines outlined by the Foreign Exchange Management Act, people residing outside India must adhere to specific banking procedures. These include converting their standard resident account into a Non-Resident Indian Account. It is advisable to initiate this process promptly upon relocating overseas.
An NRI Account is meant for global Indians. This banking facility is regulated by the Reserve Bank of India. The primary objective of this account is to help you park your foreign earnings in one place. Based on your unique investment and banking needs, it comes in three distinct types:
- Non-Resident External Account
- Non-Resident Ordinary Account
- Foreign Currency Non-Resident Account
Although each type maintains your funds, their features vary. Knowing about these differences is essential to make a suitable pick and fully enjoy the benefits of an NRI Account. This guide provides a brief idea:
NRE Account
This NRI Bank Account lets you transfer foreign earnings to India. It possesses features like:
- Taxation policy
Interest earnings obtained by depositing in this account are exempt from taxes.
- Repatriation
Funds maintained in an NRE Account are fully repatriable. This means that you can move them freely.
- Joint account facility
An NRE Account offers joint account holdings. However, the co-holder should be an NRI.
- Deposits & withdrawals
This NRI Savings Account type lets you deposit in foreign currency and withdraw in Indian Rupees.
NRO Account
An NRO is a rupee account opened to deposit income earned in India. Examples include rent, dividends, interest, etc. You can gain access to the following features once you open this account online:
- Taxability
Interest earned in an NRO Account is taxable under the Income Tax Act 1961.
- Repatriation
You can repatriate the interest amount. The principal amount, however, can be repatriated within a set limit. The same applies to an NRO Fixed Deposit.
- Joint Account facility
An NRO Account allows joint holdings with another NRI or Indian resident.
- Deposits & withdrawals
You can deposit in foreign and Indian currency and withdraw in the latter.
FCNR Account
An FCNR Account is a Fixed Deposit Account. It lets you deposit income earned overseas in foreign currency.
- Taxability
Interest earned in an FCNR FD is not taxable.
- Repatriation
Such accounts offer free repatriation of both principal and interest earned.
- Joint Account facility
FCNR Accounts allow joint holdings with another NRI or close relatives who are residents. You can avail of this perk, however, it varies between banks.
- Deposits & withdrawals
Premature withdrawal is possible in an FCNR Account. However, interest can be obtained only after the completion of a year. Check this with your banking partner for further clarity.
Conclusion
Educating yourself about the functions, perks, and features of each NRI Account is important. Such knowledge guides you in choosing the right type that satisfies your banking requirements effectively.
