Banking For The NRI – What You Can Do With Your Hard-Earned Money

Let’s start with the basics – who is an NRI?

If you are a citizen of India who resides outside India, then you are a Non- Resident Indian or NRI. Read more about it here.

The Accounts an NRI can Operate are:

Non-Resident (External) Rupee Account Scheme

[NRE Account]Foreign Currency (Non-Resident) Account (Banks) Scheme [FCNR (B) Account]

Non-Resident Ordinary Rupee Account Scheme [NRO Account]

Accounts simplified :

NRE Account Explained:

As an NRI you can deposit foreign currency as an Indian money account. This is the NRE account.

The NRE is a Non-Resident External Account. Your foreign currency (money) will be converted to Indian Rupees (INR). You can withdraw this money as Rupees.

NRE accounts can be Savings, Current, Recurring, or Fixed Deposit accounts. The account can be operated jointly or as an individual. But if it is jointly, then it has to be with another NRI.

PROS of the NRE account are that the money is tax-exempt – both the principal and the interest are tax-free.

You can repatriate (transfer to a foreign account)  the money at any time.

CONS of the NRE account are that the exchange rate can fluctuate. The NRE account does not protect you from fluctuations in the exchange rate.

This kind of account can be either personal or for business. The NRE account is generally used for making direct investments in India.

NRO Account Explained:

A Non-resident Ordinary account or NRO account is used by you as an NRI to manage your income or interest earned in India. You may get a pension, rent, or dividend income in this account. You can have foreign currency deposited in the NRO account, but it will be in Indian currency only and the money cannot be transferred or repatriated to a foreign account.

You can have this account with an Indian resident on a former or survivor basis. An NRO account can be opened with another NRI also. You can transfer money to the NRO account from the NRE but the interest you earn on this will be taxed as TDS (Tax Deducted at Source).

Other Features of the NRO Account

Money in the NRO account may be repatriated (transferred) abroad up to one million dollars. It can also be transferred to the NRE account within the one million dollar limit.

What is the FCNR Account?

The Foreign Currency Non-Resident Account or FCNR account is used if you are an NRI who wants to have a fixed deposit account in India. The money you earn as foreign currency is kept as foreign currency in the FCNR account. Usually as US Dollars, Pounds Sterling, Euro, Japanese Yen, Australian Dollars, or Canadian Dollars.

Since the money is held as a foreign currency you don’t have the risk of fluctuations affecting the value. It also gives you good interest rates. The account is risk-free and gives you a high-interest rate. Use it if you are not sure how and what to invest in.

Features of the FCNR Account:

The FCNR account is an excellent choice for you as an NRI due to the following:

  • The account is a Term-deposit account and not a savings account. You can withdraw the money prematurely, but only after completing one year.
  • You can open an FCNR by transferring from your NRE account.
  • The interest earned on the FCNR account is tax-free – not taxable in India.
  • The principal and the interest may be transferred abroad.
  • You can get an overdraft on the FCNR account.

Reference Courtesy: HDFC and RBI

How Do You Remit Foreign Currency to India?

You may use SWIFT Transfers from your foreign bank account to India.

You may also use 3rd party remittance providers (in no particular order):

  • Remitly
  • Western Union
  • Xoom
  • TransferGo

Here is a list of some well-known banks that offer NRI services:

  • HDFC Bank​
  • ICICI Bank
  • AXIS Bank
  • SBI Bank
  • CitiBank

Please check with the service providers listed above for their terms and conditions

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