NRI Account Benefits

Benefits of NRI account


What is NRI Account?

Non-Resident Indians or NRIs are basically Indian citizens who permanently reside outside India. Many times, the NRIs wish to open an account with a recognized financial institution, mainly banks, in India and deposit their hard earned money in such accounts. In order to facilitate such wishes of the NRI, the Government of India has proposed the concept of NRI Account. Some important things related to opening an NRI Account are:

  • An NRI Account can only be opened by a Non-Resident Indian.
  • Such an NRI Account can only accept funds deposited by the NRI.
  • An NRI Account can only be opened and operated by a financial institution in India which is authorized by the Reserve Bank of India to provide such services.

NRI Account Benefits

One of the primary benefits of having an NRI Account is to earn a tax-free interest on the deposits made by the NRI. The deposits, whatever amount it may be made into an NRI Account, by any NRI are exempted from income tax in India. This means that you are not supposed to pay any taxes on any interest earned from such deposits.

Other NRI Account Benefits Include:

  • Allowing the NRI to deposit and keep the money in Indian Currency.
  • NRI Accounts in India offer the NRI higher rates of interest as compared to the interest rates offered by local foreign banks.
  • Such bank accounts can be operated online completely, thus the NRI need not be physically present at the branch of such bank for any operation.
  • NRI accounts have mandate facility.
  • The NRI account requires maintaining a low minimum balance.
  • The NRI accounts also attract various investment benefits from the individual banks.
  • The NRI also get the opportunity to freely repatriable. This essentially helps the NRI to remit any fund overseas using these accounts without seeking prior approvals from Reserve Bank of India.

NRI Account or the Accounts opened and operated by a Non-Resident Indian at any branch of a local bank in India can be of various types such as:

  • NRE
  • NRO
  • FCNR

NRE Account

NRE Account is the short form for Non-Resident External Account. This term refers to an account where funds can be deposited by a Non-Resident Indian with any financial institution within the Indian Territory, somewhat similar to the concept of an NRI Account. An NRE account specifically allows the NRI a process of an efficient transfer and conversion of both foreign and Indian currency, both outside and within India. The funds deposited in an NRE Account are repatriable. The types of funds which are credited in an NRE account include:

  • Inward remittance from outside India
  • Transfer from other NRE/ FCNR (B) accounts
  • Interest accruing on the account
  • Interest on investment
  • Maturity proceeds of investments (if such investments were made from this account or through inward remittance)

NRO and FCNR Account

NRO account stands for Non-Resident Ordinary Rupee Account. A PIO or a Person of Indian Origin and an OCI or Overseas Citizen of India can also open an NRO account apart from an NRI. Unlike an NRI Account, NRO Accounts are not repatriable for all amounts except for all current income. It is important to note that the balance amount in an NRO account of an NRI or PIO are remittable up to a maximum limit of USD 1 million in a single financial year (a financial year follows a twelve month period starting in April till March) along with their other eligible assets. The types of credit which are acceptable in this account include:

  • Inward remittances from outside India
  • Legitimate dues in India such as interests
  • Transfers from other NRO accounts

FCNR, on the other hand, is a Foreign Currency Non-Resident Account. FCNR is not a savings account literally like NRE or NRO. It is, in fact, a type of Fixed Deposit Currency Account. This type of account benefits those NRIs who wish to invest in India without worrying about the volatility of currency of India. This term deposit account can be maintained in any foreign currency.

Deposits in any FCNR account, prior to 2011, could be maintained only in terms of these following six major foreign currencies:

  • US Dollar
  • UK Pound
  • Canadian Dollar
  • Deutsche Mark
  • Japanese Yen
  • Euro

But post-2011, RBI has allowed authorized dealer banks within India to permit FCNR deposits in any permitted currency. Permitted Currency is described as any foreign currency which can be freely converted such as Danish Krone, Swedish Krona, Swiss Franc, among other such currencies. FCNR deposits can be made for a minimum period of one year and maintained up to a maximum term of five years. Premature withdrawal of FCNR deposit is possible with a penalty interest of one percent. In case such FCNR deposit is closed within a year, no interest is accrued on such amounts. FCNR deposits can be made via wire transfer or cheques transaction from an overseas bank account of NRI. Deposits can also transfer from an existing NRE account. NRIs can also open FCNR account by using travelers’ cheques or foreign currency notes while visiting India. FCNR deposit balances are easily repatriable outside India.

Eligibility Criteria to Open NRI Account

NRI Account can only be opened by any NRI (Indian citizen residing outside India) or PIO (Person of Indian Origin) or OCI (Overseas Citizen of India). The individuals willing to open an NRI Account needs to submit the following documents:

  • A photocopy of the Passport
  • Valid Visa (work visa, residence visa/ permit, dependent visa). However, in the case of PIOs Visa is not applicable in case the individuals hold a foreign passport.
  • Overseas address proof (for e.g., utility bills, bank statements)