Complete Guide to NRI, NRO, NRE and FCNR Account – Features & Benefits

What is NRI?

An Indian citizen who stays outside India for employment, vacation outside India, or stays abroad under conditions indicating the intent for an indefinite duration is a non-resident Indian.  Full Form of NRI is Non-resident Indian.

What is NRO?

The full form of NRO is Non-resident ordinary. An NRO or Non-Resident Ordinary is a kind of savings account where you can manage your income made in India like dividends, rent, pension, etc.

What is NRE?

The full form of NRE is Non-resident external. Non-Resident External or NRE Account means funds deposited with a financial organization that permits the resourceful conversion as well as sending Indian and foreign currency both in and out of India.

NRE Account Meaning:

An NRE account or Non-resident external account can be opened by any person who is living outside India. NRIs having NRE account in India are allowed to hold foreign currency income in Indian rupees. All the funds, along with the accumulated interest, are generously repatriable. Moreover, the interest gained is not taxable in India.

FCNR – FCNR stands for Foreign Currency Non-Repatriable.

NRI Account:

If you are an NRI who wants to open an Indian bank account, you can go for an NRI bank account. After opening an NRI account, you may easily send cash to your family members. While opening an NRI account, you should understand that, it provides an easy access to your money, it keeps time and money jointly as you do not have to run to a bank or ask somebody for a favor to give that definite amount of money to your near ones.

What is an FCNR Account?

An FCNR or Foreign Currency Non Resident account is a term deposit account that can be managed by PIOs and NRIs in foreign currency. Therefore, FCNR accounts are not a kind of savings accounts, but FD or fixed deposit accounts.

What currencies can NRI maintain in FCNR accounts?

Before 2011, FCNR deposits were permitted to be kept in 6 currencies such as US dollar, Pound Sterling, Japanese Yen, Euro, Canadian and Australian dollar. On the other hand, in October 2011, the Reserve Bank of India came to a decision that authorized dealer banks in India may be allowed to take FCNR deposits in any allowed foreign currency.

FCNR B or Foreign Currency Non Resident (B) account:-

FCNR B is an account that can be operated in an Indian bank by an NRI or a Person of Indian Origin (PIO) in foreign currency is FCNR (B) account. The letter B in FCNR (B) is called as Bank. FCNR B is an account that allows the NRI to maintain his deposits in foreign currency. Problems of currency conversion can be decreased through such kinds of accounts.

Documents needed for opening an FCNR (B) account:

The subsequent set of documents will be needed by an NRI to open an FCNR account:
Passport photocopy of the account proposer
Visa photocopy of the account proposer
Bank account statements held out of the country
Current residence proof

NRO to NRE Transfer:

The Reserve Bank of India or RBI now allows funds transfer from an NRO to an NRE account within the whole ceiling of 1 million dollar per financial year subject to tax payment, as allowable. You could think about transferring the funds again to your NRE or non-resident external account after disbursing taxes.
You may perhaps think about using your NRO or non-resident ordinary account rupee balance to spend in conjugal equity-connected mutual funds or National Savings Certificates. Related to the tax accountability on the interest already gained on your NRO account deposits, supposing that you are a non-resident for income-tax functions as well, you can obtain the advantageous tax rates in the Double Taxation Avoidance Agreement (DTAA), which India may have with the nation where you are a tax inhabitant.

NRE NRO and FCNR Accounts:

An NRE or Non-Resident External account is a bank account that an NRI can open and maintain by depositing foreign currency.

While a Non-Resident Ordinary or NRO account is the standard bank account opened by an NRI India.

NRO account can also be opened by delivering remittances by an NRI. It provides same facilities as an NRE account, apart from that any repatriation made through this account should be notified to RBI by filling up stipulated forms.

Person of Indian Origin (PIOs) and Non Resident Indians (NRIs) being Indian Citizens as also foreign citizens of Indian origin can open and maintain foreign currency deposit accounts under Foreign Currency Accounts Scheme.

FCNR (B) Account or Foreign Currency Non-Resident Bank Accounts are same to any NRE account apart from that the money is kept in foreign currency. FCNR B accounts are only in the kind of term deposits of one to five years.

NRI Account Benefits:

As many Indians always keep maximum amount of their money in INR and they also have an investment in INR, e.g., FDs, stock holding, mutual funds, etc. It makes sense for them to open a bank account in India. As you cannot keep your occupant savings account when you become an NRI, you only have two alternatives to open a bank account in INR, primary NRE (Non Resident External) account in which you can only keep foreign currency, e.g., GBP or EUR, and USD, secondary NRO account (Non Resident Ordinary) in which you can keep both foreign as well as Indian currency.

According to the FEMA act, it is against the law for NRIs to keep resident savings account in India. You will require converting your resident savings account into an NRO (non-resident ordinary) account. If you go on to use your resident account, you might get big penalties. You may also close your present account and just make use of an NRO account.

If you predict the requirement to repatriate more than one million dollars or if you want to manage savings in INR, then selecting the best NRE account may be the best choice. If you want to manage India-based income in INR, then go for an NRO account.
With the rupee persisting to stay unstable, the Foreign Currency Non Resident (FCNR) account can be a good choice for NRIs looking for investments in India without thinking much about currency threats.

Also Read:

Best Investments for NRI in India

Best NRI Investment Options

NRE Bank Account:

What is an NRE Account?

An NRE bank account is a savings account managed in where you spend your foreign income made outside India.

Why select an NRE Account?

To benefit from tax-free interest and completely repatriability of money.
This is the most suitable process to use your foreign income in India.

Features and Advantages:

  • Tax benefits: Interest obtained by you is not taxable in India.
  • Simple funds movements: Funds in NRE account are totally repatriable.
  • Low balance needed: Least monthly balance as low as Rs. 10,000 only.
  • Account access anytime, anywhere: With global debit card, suitable access at over 11,000 ATMs and over 3,000 branches around India, and mobile and 24×7 online banking.
  • Interest rates: Banks calculate interest rates on regular closing balance at 4% per year. You get interest half–yearly in the month of June and December.
  • Inexpensive and problem free money transfers: Available via different online and offline methods at viable exchange rates.
  • Money to India: Secure and easy online money transfer checking service with online transfer to over one hundred banks in India.
  • Multiparty holding: With a different NRI.
  • NRI benefit: Handpicked special offers fulfilling your requirements when in India as well as when out of India.

Best NRI Bank in India:

You can open the account with well-known public sector banks such as State Bank of India, Punjab National Bank, Canara Bank, etc.

All profit-making banks offer better service. NRI customer anticipates the following services from these banks:

  • Fast realization of cheques delivered for collection
  • Convenient transfer of money
  • Monthly information about the account transactions through email
  • Notifications about big transactions in the account
  • Daily contacts with the clients
  • When it comes to the above things, we cannot state any bank in this regard. An enhanced workforce may be easy to get to in public sector banks and behind schedules, public sector workers behave in a good way with their customers. Sometimes, the methods with these banks proscribe them to increase definite services in fast way.
  •  In case you are residing in a distant country, you have to search a bank in your country that has better link with an Indian bank and you have to open the account with that bank in India only as you may be in a better condition to deliver remittances to your family members in India simply and instantly.
  • Whatever the causes for being away from one’s home state, the one thing you miss nearly everyone is being not able to be there for your family every time there is a requirement. The requirement could be anything from a family marriage or a festival to untoward events such as accidents, death, etc.
  • There are methods by which you can send help in the money form to your family members. Contemporary improvements and technological advancements have made it feasible to send funds to India in a suitable and fast way. NRI remittances including different modes such as online fund transfer, walking in to reporter banks, sending DDs, cheques, which all make sending money very easy.

Different methods of sending money:

1. Fund or money transfer agents –
Companies act as agents or mediators for allowing remittances in India with simplicity. Amongst one of the most conventional methods of remittances, these companies charge small fees for funds or money transfer and give you improved conversion rates.

2. By banks –
If you and the recipient have accounts in the same bank, then transferring money through banks is the most suitable and safe remittance method.

3. By the internet –
There are some online portals available that smooth the progress of remittances separately. Additionally, the transfer will be fast. The safety and reliability of these institutions are something that requires being carefully checked.

It is always secure to do transactions by a bank for our fund transfer requirements. Remitting money to the people back home increases the income of recipient countries and helps in offsetting financial losses.

What is NRO Account?

NRO or Non-Residential Ordinary Account is funds deposition with an Indian financial institution. The account holder can deposit and manage collected rupee funds expediently via an NRO account. Any NRI can open an NRO account.

NRIs may also change their present resident savings account into an NRO account when their position changes from resident to non-resident.

What is an NRE Account?

An NRE or Non-resident External  account allows an NRI to hold and manage foreign currency income in INR. The account holder may send back all the funds along with the interest gained at any point of time without having to reimburse tax on the interest amount. Any NRI may open an NRE account.

NRE vs NRO:

Repatriation: You can simply repatriate funds from an NRE account involving the interest gained in that account. However, RBI has imposed some limitations on NRO accounts.  You can send only up to USD 1 million in a financial year. Additionally, you will require a chartered accountant to do the paperwork for you.

Taxation laws: Tax exemption is provided to NRE accounts. But, income tax, wealth tax, and gift tax are not applicable in India. As per the law of Indian Income tax, NRO accounts are chargeable and income tax, wealth tax, and gift tax are applicable. Interest obtained on an NRO account is also subject to taxation.

Deposit and Withdrawal of Funds: You can deposit funds from a foreign country in both NRE and NRO accounts. Funds withdrawal is in INR only.

Transfer: You can send funds to both NRE account as well as NRO account. As a matter of fact, you can send funds from an NRO to another NRO account. Although, you cannot send funds from an NRO to an NRE account.

Joint Accounts: Two NRI person can open an NRE and NRO joint account. But, you cannot open an NRE joint account with an occupant Indian. This facility is provided only with an NRO joint account.
Reason: An NRE account helps you in transferring funds to India earned abroad and maintaining them. Whil NRO accounts helps you manage daily flow of income in the form of pensions, rent, and dividends from India.

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