NRI Bank Accounts Explained in Simple Language

NRIs and foreign nationals of Indian origin (PIO), residing overseas can open bank accounts in India without seeking any permission from the Indian government authorities. Basically, there are two types of bank accounts that NRI/PIO can maintain in India. These are: 1. Non Resident External, commonly referred to as a NRE account 2. Ordinary Non-Resident account, referred to as NRO account

Difference between NRE and NRO account

NRE Account:

• Money in NRE accounts can be repatriated abroad by the account holder. When you make a deposit in NRE accounts, the money is converted to Indian rupees and held in your NRE account. When you with draw money from this account and want to have it sent abroad, the Rupee amount withdrawn is then converted to the foreign currency, Say US$ and sent to you. • No income tax is payable on the income earned by way of interest on NRE accounts. Hence no TDS is deducted from NRE accounts. While NRE account earnings are not taxable in India, they may be taxable in the foreign country you reside in. • NRE accounts cannot be held jointly with Indian residents. They can be held jointly with NRIs only

NRO Account:

• Repatriation from NRO accounts is generally not freely allowed. Under some circumstances, repatriation may be permitted and they are explained below* • Interest earned on NRO accounts is taxable in India and may also be taxable in the foreign country you reside in. TDS is deducted by banks from NRO accounts. • NRO accounts can be held jointly with Indian residents. *Conditions under which money in NRO accounts can be repatriated abroad. The government of India now allows Non Residents to repatriate up to one million US$ per calendar year from their NRO accounts subject to the payment of all applicable taxes. The one million US dollar limit includes any money received by NRI/PIO from the sale of their properties in India provided the property has been held for a period of ten years or more.

Repatriation if Property not held for 10 years

In case a property that is sold by a NRI or PIO has not been held for at least ten years, then repatriation can be done at a later date. In such situations, the money received from the sale of the property must be deposited in an NRO account. Once the duration of the time the property was held, plus the time the money was deposited in NRO account equals ten years, the money can be repatriated. For example, if a property was sold after 7 years of purchase, then the money from the sale of this property must be deposited in an NRO account for 3 years to complete the ten year requirement before repatriation can be done.

Bank Accounts for Returning NRIs and Persons of Indian Origin Living in India

NRIs/PIO who return to India and hold NRE or NRO bank accounts, are required to notify their banks of their return to India and banks in such cases will re-designate their NRE and NRO accounts as resident accounts. In such cases, any fixed deposits that are held till maturity will continue to get the benefit of the rate of interest that was set prior to the account holders return to India. This ensures that no loss of interest is incurred when re-designating bank accounts.

NRI/PIO Keeping Foreign Currency Accounts in

India

NRO and NRE accounts are held in Indian Rupees, however NRIs and foreign nationals of Indian origin (PIO) can if they wish hold foreign currency accounts in India. Foreign currency bank accounts in India are known as FCNR accounts. These accounts can be held in US dollars, GBP, Euro, JPY, Australian or Canadian dollars.

Difference between NRE and FCNR Bank Accounts

In case you are wondering why bother with NRE accounts, which are converted in Indian rupees when you can hold foreign currency accounts, FCNR accounts have to be fixed deposit accounts, or term deposits as they are commonly referred to in western countries. Whereas NRE and NRO bank accounts can be in the form of current or savings accounts, where you can deposit and withdraw money from at will, FCNR account deposits do not allow this, these accounts must be for a fixed period that can range from one to five years. In the event an NRI/PIO returns to India, their FCNR deposits not be re-designated and will continue to be treated as FCNR deposits until maturity. More on NRI Banking you may wish to see: • Banking Choices for Non Resident Indians - Go to article >> • Have a question related to NRI Banking in India, Check out our FAQ section that now has over 425 questions and answers on various NRI issues.