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.
