Everything you need to know about NRI banking

The moment you become a non-resident Indian (NRI), managing money in the home country is a major concern. This is where NRI banking and its services play a crucial role. Knowing about the types of accounts helps NRIs with money management. Depending on aspects like purpose, tax obligations, repatriation, interest rates, etc. NRIs can decide which account suits their requirements. 

NRIs opt for four types of account. They are as follows – 

Non-resident ordinary account (NRO): You can open an NRO account as an operating savings account, current account, or a fixed deposit. It is a rupee-based non-repatriable account. The moment your status changes from a regular citizen to an NRI, you must convert your existing savings account to an NRO account. All the income and commission accrued from India, such as interest income, commission, property rent, dividends, can be deposited in this account. The NRO account interest rates are attractive, and the prices on NRO FD is at par with the domestic FD interest rates. Also, the interest earned on NRO account is subject to 30 per cent tax. You can save the tax if you furnish Tax Residency Certificate (TRC), form 10 F, and PAN details. This is possible only if there is Double Taxation Avoidance Agreement (DTAA) between the home country and source country. 

Non-resident external account (NRE): If you require a bank account with the easy outward remittance, then an NRE account is ideal. The NRE account is rupee dominated and allows repatriation of funds. While remittance from India to any country is allowed, there are some conditions under which you can do so. NRE account allows credit like remittance from other countries, income like interest, dividend, rent from India, etc. The primary motive behind this account is depositing overseas income after converting it into rupees. The amount held in the NRE account, as well as the interest amount, are repatriable. 

Foreign Currency Non-Resident Account (FCNR): If you want to deposit your foreign currency denomination and earn interest on the same, you can do so by opening an FCNR account. It is a fixed deposit account in foreign currency. The deposit period is between one to five years. Those who wish to avoid currency fluctuation risk can invest money in the FCNR account. You can make deposits in FCNR in denominations such as a USD, Japanese Yen, Euro, Sterling Pound, etc. The interest earned from FCNR is exempt from taxes. 

Resident Foreign Currency Account (RFC): The moment your resident status changes from normal citizen to NRI, you need to open an NRO account to deposit your earnings from India. Similarly, when you plan to settle in India after several years working abroad, you may still have some foreign investments and assets overseas. You can open an RCF account to deposit these incomes. So, in the future, if your status changes to NRI, you can convert the RFC account to NRE or FCNR account. You can open the RCF account as a saving, current, or fixed deposit account. You can maintain the account in acceptable foreign currency. Interest earned on RFC account is taxable at the applicable rate.

Benefits of making your wife the primary applicant in a home loan

Owning a property gives one a sense of lifelong financial security. A permanent roof over the head can prove incredibly beneficial, especially if you are stuck in a financial crunch. But with the rising property rates, one has little choice but to take on a home loan to purchase a property. Most couples today opt for joint loans, in which the husband is typically named as the primary borrower and the wife is named the secondary borrower. But did you know that there are many perks of naming your wife (or a woman per se) as the primary loan borrower. Let’s find out how you can benefit by naming a woman borrower the primary applicant when you apply for home loan. 

Reduced interest rates: A housing loan is a high value loan which lasts for tenures lasting up to 25 years, sometimes more. Therefore, it is in your own interest to get lower interest rates on this loan. A high interest rate, directly results in you paying a higher loan repayment amount in general and a higher equated monthly instalment (EMI) in particular. As such, even a slight reduction in the rate of interest can amount to savings to the tunes of a several thousands, possibly a few lakhs in the long term. A lower interest rate also reduces your EMI considerably. Now, when you name your wife as the principal loan applicant, you can get a reduction of 0.5% in the loan interest rate as per government rules. The 0.5% makes a huge difference on high-value loans. All lenders are obligated to provide female borrowers with this reduced interest rate benefit.

Lower stamp duty charges: Most lenders generally provide finance for approximately 85% of the market value of the property and the borrower must pay a certain percentage of money in stamp duty charges. Now, the advantage of naming you wife as the primary applicant of the house loan is that you pay lesser amounts on the stamp duty charges. As you know, stamp duty charges are levied on the property cost. With the reduced interest rate, the stamp duty charges are also lowered significantly. Women borrower can get a concession of 1% to 2% on the stamp duty charges associated with the loan, thanks to subsidies offered by the government on loans for women. As such, if you name your wife as the primary borrower on a loan worth ₹5,000,000 (for instance), you end up saving approximately ₹50,000 to ₹100,000 on the stamp duty charge alone. 

Tax benefits: Tax benefits are provided to all applicants repaying a home loan in India. Whether you are a male or a female borrower, you are eligible for tax reductions up to a maximum of ₹150,000 per annum on the principal loan amount and ₹200,000 on the interest component of the loan. If you name your wife as the principal applicant, both of you can enjoy these tax savings in equal measures. So, as a couple, you receive tax reductions on approximately ₹700,000 per annum. 

Age and tenure benefits: Naming your wife as the primary applicant on the home loan provides you with longer tenures of up to 30 years, as opposed to the 20 year tenure provided to male applicants. Also, the maximum age for male borrowers to repay the loan is 65 years, whereas women can repay the loan up to the age of 70.

The government of India has rolled out several housing finance schemes for female borrowers. These truly help you as a couple save a lot of money in every step of the loan process.

6 benefits of using a home loan EMI calculator

The ownership of a home is every individual’s dream, but a substantial investment goes into buying a home that can be too much financially for an individual. A home loan is a secured loan which is provided for the purchase of the property. The property is mortgaged as security for the loan amount to the financial institution. In a home loan, the financial institution provides the customers with the loan amount for the purchase of the home. A customer will have to make the repayments on the loan through equated monthly instalments (EMIs). The tenure of a loan is decided at the time of loan sanctioning, and a customer can choose the tenure of the loan. A customer can use a home loan EMI calculator for calculating the EMI amount. These calculators are available on the official website of the financial institution

Some of the benefits of using a home loan EMI calculator:

Easy Process: Using the home loan EMI calculator is one of the easiest ways of getting to know about the EMI amount. A customer will only have to enter the loan amount, interest rate, processing fee and tenure. A customer will not have to do it manually, the actual computation will be taken care of by the calculator. 

Comparing Different Offers: A customer can easily use the home loan EMI calculator for comparing the different loan offers from different banks. The results show the total cost of each loan along with their respective EMIs. This helps in narrowing down the best option. 

Getting the breakup of finance charges: This tool helps a customer in understanding the financial charges like the total interest payable and the processing fee value associated with the EMI. As the banks and financial institutes present them as a percentage of the loan amount, knowing the actual value can help the customers in understanding the true cost of the loan.

Choosing the Correct Tenure: A home loan EMI calculator also helps in deciding the tenure of the loan. If an individual can afford to pay a high EMI, they can choose a short loan period and paying off a loan as quickly as possible. If a customer wants to pay their EMIs comfortably, they can extend their tenure. These calculators help a customer in analyzing which tenure will be good for them. 

Helps with Loan Management: A customer may have some extra funds for making prepayments while paying their EMIs. If a customer wants to revisit the financials and see how the prepayments can help to pay off the loan before their term ends, a home loan EMI calculator helps the customer do that. 

Helps in Validating Information: If a customer is negotiating a housing loan deal with a financial institution, they can verify the repayment schedule it provides. The table of details from a calculator helps in verifying this, sometimes the number may differ, as financial institutions also include certain other fees and charges in the EMI calculation.