A Non-Resident Indian (NRI) or Person of Indian Origin (PIO) has access to different types of bank accounts in India. Understanding the difference and choosing the right one according to your liquidity and investment requirements is important. These different types of NRI Accounts can be opened with your earnings either from income sources within India or from your country of residence.
Different types of NRI bank accounts
NRE Account
An NRE Account allows you to park your foreign earnings in India, with full repatriability, meaning you can transfer funds back to your country of residence without any restrictions. The account can be opened as an NRE Savings Account and the funds are maintained in Indian Rupees (INR).
The key benefits include tax-free interest earnings in India, making it ideal for those who wish to save or invest their overseas income. You can deposit foreign currency, which is converted to INR at prevailing exchange rates. You can also have joint account holders, either NRIs or a close relative who is a resident Indian.
NRO Account
An NRO Account is a rupee-denominated account allowing NRIs to manage Indian and foreign income sources, such as rent, dividends or pension. You can deposit funds in Indian or foreign currency, with foreign deposits converted into INR at prevailing exchange rates.
While the interest earned can be fully repatriated, repatriation of the principal is restricted under the Foreign Exchange Management Act (FEMA). The interest earned on NRO Accounts is subject to tax in India, and tax deductions at source (TDS) apply. NRO Accounts can also have joint account holders, including both NRIs and resident Indians.
FCNR Account
An FCNR (Foreign Currency Non-Resident) Account allows NRIs / PIOs to maintain balances in foreign currency, protecting them from exchange rate fluctuations. Unlike the rupee-denominated NRE / NRO Accounts, an FCNR Account keeps funds in foreign currencies like USD, GBP or EUR. You can open an Axis Bank FCNR Account, which is opened as a Fixed Deposit booked in 6 different currencies, for tenures ranging from 1 to 5 years.
Both the principal and interest earned in an FCNR Account are fully repatriable, allowing you to transfer them abroad without any restrictions. Additionally, the interest income on these accounts is non-taxable in India, offering significant tax advantages. This account is ideal for NRIs seeking long-term, foreign currency deposit options.
Conclusion
Choosing the right NRI bank account type depends on your specific needs, whether you’re looking to park foreign income, manage Indian earnings or maintain deposits in a foreign currency. Each type of NRI bank account comes with its own benefits and tax implications, so take your time to assess which one fits best for you.
Also Read: Top 12 advantages of NRI accounts to know
FAQs
Are there any tax implications for NRI Accounts?
Yes, while the interest on an NRE or FCNR Account is tax-free in India, the interest on an NRO Account is taxable.
Can NRIs open joint accounts with residents or other NRIs?
Yes, NRIs can open joint NRE, NRO and FCNR Accounts with other NRIs or Indian residents, but the resident must be a close relative.
What is the minimum balance requirement for NRI Accounts?
The minimum balance requirement for NRI Accounts varies depending on the bank and type of account.
How can an NRI manage their account from abroad?
NRIs can manage their accounts from abroad by appointing a mandate holder or granting Power of Attorney (PoA) for account operations. Additionally, they can open joint accounts, use bank apps or money transfer services, and automate bill payments for convenience.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author 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.
