Informing educating and connecting Indians across the globe . . . by Virendar Chand
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:
Non Resident External, commonly referred to as a NRE account
Ordinary Non-Resident account, referred to as NRO account
Difference between NRE and NRO 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the Rupee amount withdrawn is then converted to the foreign currency, Say US$ and sent
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
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
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
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
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.
Disclaimer: Information provided is for general knowledge only and should not be deemed to be professional advice. For professional advice kindly consult a professional
accountant, immigration advisor or the Indian consulate. Rules and regulations do change from time to time. Please note that in case of any variation between what has
been stated on this website and the relevant Act, Rules, Regulations, Policy Statements etc. the latter shall prevail.
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