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NRI Banking
Which bank account should you open as an NRI
India is a popular investment destination for Non-Resident Indians looking to grow their wealth. As an NRI you would need a bank account to carry out investment transactions smoothly. If you are confused on whether to open an NRE or NRO Savings Account or to invest in an NRE/NRO Rupee or FCNR Deposit, read on to know the differences and which one is best suited for you:
1) Non-Resident External (NRE) Savings Account
Currency – It is a rupee-denominated account to park your income earned overseas. The foreign currency deposited into this account is converted to Indian rupees at the prevailing foreign exchange rate.
Given the safety offered by FRSBs and the long maturity period, they may be one of the investment options you could look at while building your retirement portfolio.
- The interest earned on the account
- Transfer from other NRE Savings Account or FCNR(B) Account
- Maturity proceeds of investments, provided such investments are made from this account or through inward remittance
- Incomes such as rent, dividend, interest, pension, etc.
Permitted credits:
- Payment in rupees such as paying utility bills, etc
- Transferring money to another NRE Savings Account
- Making investments in India, and remitting money outside India
Permitted debits:
Repatriable/Non-repatriable- It is fully repatriable, which means the principal and the interest earned are completely transferrable overseas. Furthermore, the interest earned is exempt from tax.
To know more about all the NRE Savings Accounts offered by Axis Bank, click here and find out more about savings account interest rates.
2) Non-Resident Ordinary (NRO) Savings Account
Currency – Use it for managing your income earned in India, hence only rupee deposits are allowed.
- The income earned in India i.e. dividend, interest on deposits, rent, pension, etc.
- Sale proceeds of assets including immovable property acquired out of rupee / foreign currency funds or by way of legacy/inheritance
- Money remitted money from outside India and transferred from other NRO accounts.
Permitted credits:
- Local payments in rupees including payments for investments in India
- Transfer to another NRO account
- Remit outside India up to USD 1 million (aggregate across NRO Accounts), per financial year.
Permitted debits:
But NRO funds cannot be used to open an NRE Account or to invest in FCNR Deposits.
Repatriable/Non-repatriable- While you can repatriate or transfer overseas the interest freely, the principal is repatriable only within certain limits. Moreover, the interest earned on the NRO Savings Account is subject to Tax Deduction at Source (TDS).
If you wish to keep your India-based earnings in India, you may consider opening an NRO Savings Account.
Similarly, if you are planning to move abroad, you have the option to convert your existing resident savings account into an NRO savings account before you leave India.
3) Foreign Currency Non-Resident (Bank) Account
Currency - FCNR (B) account is a term deposit that can be opened only in a freely convertible foreign currency. Axis Bank gives you a choice of six currencies: US Dollar (USD), Great Britain Pound (GBP), Euro, Japanese Yen (JPY), Australian Dollar (AUD), and Canadian Dollar (CAD).
Tenure - 1 year to 5 years
Repatriable/Non-repatriable:
Both interest and the principal are freely repatriable and the interest earned on the deposit is fully exempt from tax. The withdrawals from the FCNR Deposits are permissible without penalty for individual deposits below USD 1 million. Besides, premature encashment of the FCNR Deposits is also permitted; however, keep in mind that the interest will be paid only if the deposits are held for a minimum of 1 year.
You can avail of a loan against FCNR (B), subject to the margin requirement of the bank. However, you cannot use the money for re-lending, agriculture/plantation activities, and real estate business. On change in residential status, the FCNR Deposits may be allowed to continue till maturity at the contracted rate of interest. To know more about the FCNR Deposit, click here.
The NRO and NRI Accounts as well as the FCNR (B) deposit can be held in joint names of NRIs/PIOs with a resident Indian on a ‘former or survivor basis’.
[Also Read: Difference Between NRE & NRO Account]
Other than the saving accounts and FCNR Deposits, you may look at investing in the following deposits:
NRE Rupee Deposit
For seamless full repatriability, a flexible tenure, and an attractive tax-free interest, consider the NRE Rupee Deposit. You can invest for tenures ranging from 1 year to 10 years and the interest earned is not taxable in India. Both, the principal and interest earned can be transferred overseas easily since it is fully repatriable.
Partial withdrawals are permitted with NRE Savings Account. There is also an option to prematurely encash the NRE Rupee Deposit, provided you hold the deposit for a minimum of tenure of 1 years. To know more about the NRE Deposit, click here.
NRO Rupee Deposit
The NRO Rupee Deposit comes with a tenure ranging from 7 days to 10 years. Only the interest earned during the financial year is freely repatriable after deducting the tax at source (at the rate of 30.9%). The principal can be repatriated according to the restrictions in the FEMA guidelines. The balance in the NRO Account is remittable up to USD 1 million per financial year (along with the other eligible assets) for all bonafide purposes.
Both partial and premature withdrawal from the NRO Rupee Deposit is allowed. But in the case of premature withdrawal, the interest will be paid only if the deposit is held for the minimum tenure of 7 days. To know more about the NRO Rupee Deposit, click here.
NRI Pro-Rupee Deposit
This is a slight variation to the above. Here the money is invested in a fixed deposit earning an attractive return and allows you to earn from rising foreign currency exchange rates. The minimum deposit is USD 10,000 and the tenures range from 3 to 5 years. The interest earned is not taxable in India. The earnings can be repatriated only on maturity. To know more about the NRI Pro-Rupee Deposit, click here.
In the case of NRE, NRO and NRI Pro-Rupee Deposits, there is the option of an overdraft facility. All three deposits offer the option of joint holdings with another NRI/PIO or a resident Indian on a ‘former or survivor’ basis.
As an NRI looking to park money in India, choose the type of account depending on the time horizon and liquidity needs.
Disclaimer: This article has been authored by PersonalFN, a Mumbai based Financial Planning and Mutual Fund research firm. Axis Bank doesn't influence any views of the author in any way. Axis Bank & PersonalFN shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
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