NRI Corner: Different Types of Bank A/C Available For NRIs In India
Last week, we had seen that first step in investing in Indian Stock Market is to get a Bank Account. The Bank Account is needed to park your funds that you want to invest.
There are many types of NRI bank accounts available. But, there are only three basic types of accounts which are used most widely.
Following are the three types of NRI bank accounts offered by the leading banks across India:
1) Non Resident External Bank Account (NRE) : NRE accounts can be Current/ Saving/ Term Deposit account maintained in rupee which allows you to hold foreign income earned outside India. This account is fully and freely repatriable.
In simple terms repatriable means the balance held in the NRE account can be taken out of India.
Though account is maintained in Indian rupees, it can be converted into any foreign currency on the demand of the account holder for the purpose of to remit outside the country.
You can also open joint account by two or more individuals, provided all of them are NRIs.
In other words, an NRI cannot have a joint account with Indian resident but can have with another NRI as a joint account holder. However, a Power of Attorney can be granted to any residents in India for operating the NRE Accounts in India. A Power of Attorney holder can make withdrawals for local payments.
Remember, you cannot deposit rupee funds which is generated in India like rent, dividends etc.
Entire interest income from a NRE account is exempt from Wealth tax and Income Tax under the provisions of Income Tax Act in India.
One can easily convert this account into the ordinary account if the account holder returns back to India.
2) Non Resident Ordinary bank account (NRO) : NRO account is maintained in local currency i.e. Rupee and can be in the form of Current/ Saving/ Term Deposit. This account is for those NRIs who are having local income or expenses in India. Local incomes like rent, dividend or interest can be credited to this account that means you can deposit rupee funds in this account.
NRO has restricted repatriation; money can be repatriated to a limit of 1 million USD per annum after RBI reporting through supported applications – 15CA & CB.
You can have join account with NRI as well as Indian resident who is close relative as define under Section 6 of the Companies Act 1956.
Interest earned in NRO account and credit balances are subject to respective income tax bracket and are also subject to applicable wealth and gift tax.
This account can be converted to a normal resident account after the account holder returns back to India and become an Indian resident.
3) Foreign Currency Non Resident account (FCNR) : This type of account is maintained in foreign currency. You can park your foreign earnings here such as US Dollars, British Pounds, Euros, Japanese Yen, Australian Dollar and Canadian Dollar. FCNR accounts are only in the form of term deposits of 1 to 5 years.
You can keep the account in foreign currency and it can be converted whenever you need.
The main purpose of this account is to keep money to avoid loss on the currency fluctuations and to earn a fixed rate of interest on the FCNR deposits which is usually more than the country in which the NRI is residing.
Yes, it is true, the interest rates on Fixed Deposits in India is significantly higher as compared to the Interest rates in the western countries.
The bank will pay interest in the same currency.