If a person is Non Resident Indian (NRI) or Person of Indian Origin (PIO), she/he can, without the permission from the Reserve Bank, open, hold and maintain the different types of accounts with banks authorised to deal in foreign exchange. NRIs/OCBs can open the following types of accounts with banks in India, which hold authorized dealer licenses, as also other banks, specifically authorized by the Reserve Bank to maintain accounts in the names of NRIs/OCBs.
- Rupee Accounts
- Non-Resident (Ordinary) Account – NRO A/c.
- Non-Resident (External) Rupee Account – NRE A/c.
- Foreign Currency Accounts
- Non-Resident (Foreign Currency) Account – FCNR A/c (in Pounds, Sterling, US Dollars, Japanese Yen and Euro).
We shall explain various kinds of accounts for NRI or PIO in the given article.
Table of Contents
NRO, NRE, FCNR accounts for NRI
Non-Resident Ordinary Rupee (NRO) Account
It gives one the privilege of depositing overseas earnings as well as Indian earnings.
- An NRO account can be in the form of saving, current and term deposit account.
- One can have a resident of India as a joint account holder.
- Income arising in foreign currency, remittances received through proper banking channel or from NRE account and any past dues from India can be deposited in this account. But money once deposited in this account can only be withdrawn for local payments including investments.
- In a year, funds up to $1 million can be repatriated from NRO account.
- The interest earned on NRO account is taxable in India.
- NRO Savings accounts can also be maintained with the Post Offices in India.
Non-Resident External (NRE) accounts
NRE accounts gives an individual the opportunity to deposit money earned from abroad.
- It can be either in the form of a savings or current or term deposit account.
- Apart from the account holder, a resident can also operate the NRE account for making local payments as long as he has the power of attorney.
- One can freely repatriate the principal amount from the NRE account .
- The interest earned is tax free in case of NRE accounts.
- Interest on deposits in an NRE accounts is tax free in India.
- The balance lying on the account does not attract wealth tax.
- Any gifts given from the money lying in this account does not attract gift tax.
- Funds from NRE account can be transferred to NRO account but the reverse is not possible.
The primary disadvantage associated with an NRE account is that it suffers from currency risk and attracts lower rate of interest in comparison to NRO account.
FCNR (B) Account
FCNR (B) accounts are only in the form of term deposits of 1 to 5 years.
- Account can be in any freely convertible currency.
- All debits / credits permissible in respect of NRE accounts, including credit of sale proceeds of FDI investments, are permissible in FCNR (B) accounts also.
- The interest rates are stipulated by the Department of Banking Operations and Development, Reserve Bank of India and are linked to LIBOR rates.
- Terms and conditions as applicable to NRE accounts in respect of joint accounts, repatriation of funds, opening account during temporary visit, operation by power of attorney, loans/overdrafts against security of funds held in accounts, also apply to FCNR (B).
These accounts can be opened Only those banks holding an Authorized Dealers’ license or banks specially authorized in this regard by the Reserve Bank of India (RBI) are permitted to open these accounts on behalf of NRI. General guideline is an NRE account is for depositing income from abroad, NRO account is mainly for putting Indian incomes. Banks redesignate such accounts as resident accounts on return of the account holder to India
Individuals/ entities of Bangladesh and Pakistan require prior approval of the Reserve Bank. Details at RBI’s FAQ Facilities for Non Resident Indians (NRIs) and Persons of Indian Origin (PIOs)
Comparison of NRE,NRO and FCNR accounts
Table below compares NRE,NRO and FCNR accounts
| NRE | NRO | FCNR | |
| Best Suited for | To park overseas savings remitted to India by converting to INR | To park Indian earnings like rent, Indian salary, dividend, etc | To maintain account in Foreign Currency. |
| Currency | Indian Rupees | Indian Rupees | Foreign currencies designated by Presently in US$, GBP, EURO, Japanese Yen , Australian $ and Canadian $. |
| Eligibility | NRI | NRI, PIO , OCB | NRI, PIO |
| Type of Accounts | Savings, Current, Recurring Deposit or Fixed Deposits. | Saving, Current, Recurring and Fixed Deposits account. | Can be opened as Fixed Deposits. |
| Mode of Deposit | Foreign Exchange transfer from abroad ; transfer from account holder’s or other NRI’s NRE/ FCNR Account held with another bank or by deposit of foreign exchange during NRI’s visit to India. | Income from domestic non-repatriable sources or realisations from local investments / sources , transfer from NRE/FCNR accounts ; forex remittance from abroad or deposit of foreign exchange during visit to India . |
Foreign Exchange remittance from abroad/ NRE / FCNR Account or deposit of Foreign Exchange during visit to India . |
| Joint Holding With Resident | No | yes | No |
| Joint Holding With NRI | Yes | yes | yes |
| Nomination | Permissible. | Permissible with NRIs as well as Residents. | Permissible. |
| Repatriation | Principal & Interest-both Fully Repatriable. | Interest Repatriable- subject to payment of tax , Balance repatriable upto US$ 1 mn per financial year [under US $ one million scheme] |
Principal and Interest – both Fully Repatriable. |
| Taxation | Interest exempt from Income Tax. Balance not subject to Wealth Tax.No Gift Tax provisions in India. However w.e.f. 1-4-2006 amount received in excess of Rs.50,000 by way of gifts from persons other than specified relatives is included in donee’s income and chargeable to income tax. | Interest income liable to tax . Balance not subject to Wealth Tax. No Gift Tax provisions in India . However w.e.f. 1-4-2006 amount received in excess of Rs.50,000 by way of gifts from persons other than specified relatives is included in donee’s income and chargeable to income tax. |
Same as NRE Account |
| Interest | Rate linked to the LIBOR being notified by Reserve bank of India from time to time.Compounded quarterly. | Banks can offer at par with resident accounts . | Rate linked to the LIBOR being notified by Reserve bank of India from time to time.Compounded Half Yearly. |
| Loans | Available to account holder as well as third party resident in India. LOANS IN INDIA-To ACCOUNT HOLDER : For business, investment in shares & securities, purchase of house property for own residential purpose and any other personal purpose subject to a maxi. of INR 10 mn.LOANS IN INDIA-To 3RD PARTY : For personal or business purpose subject to a maxi. of INR 10 mn.LOANS OVERSEAS : Fund based/ non fund based facility for any bonafide purpose. | Available to account holder as well as third party resident in India . | Same as NRE Account |
| Permitted Credits | Refer NRE Account | Refer NRO Account | Refer FCNR Account |
| Permitted Dedits | Refer NRE Account | Refer NRO Account | Refer FCNR Account |
| Transfers | Transfer to NRE/FCNR Account of the account-holder or any other NRI permitted.Gift to Resident/NRI permitted [POA cannot make a Gift on behalf of an NRI ] | Permissible in account holder’s other NRO accounts | Same As NRE Account |
| Power of attorney | An attorney can operate an account but can not open the account, make gift, transfer funds to another NRE Account nor remit abroad .However an attorney can withdraw for local payments or remittance to the account holder himself through normal banking channels provided specific powers are granted. | An attorney can operate an account but can not open the account, make gift, transfer funds to another NRE Account nor remit abroad .However an attorney can withdraw for local payments or remittance to the account holder himself through normal banking channels provided specific powers are granted. | |
| Renewal / Switching of Account | Can be renewed and easily transferred to account holder’s another NRE / FCNR account. Transfer to another NRI’s NRE / FCNR account permitted.Transfer abroad by way of remittance – Allowed.The account can also be shifted from one bank to another bank in India. | Same As NRE Account | |
| Returning NRI’s | NRE account is to be redesignated as resident account immediately upon return, or Funds be transferred to Resident Foreign Currency (RFC) Account immediately upon return. | NRO account is to be redesignated as resident account immediately upon return, | Can be continued and maintained as FCNR uptil maturity and thereafter transferable to : – Residential Foreign Currency ( RFC) Account or balance converted into INR and retained in a resident rupee |
Links to some banks webpages for interest rates for NRI’s. Links to other banks can be found at nribanks Bank Links Webpage.
| Banks |
| SBI |
| HDFC Bank |
| ICICI Bank |
| Central Bank of India (pdf) |
| Karur Vysya Bank |
| City Union Bank |
References:
- RBI’s FAQ Facilities for Non Resident Indians (NRIs) and Persons of Indian Origin (PIOs)
- FemaOnline
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1. Can any one please tell me whether the bank is bound to pay the same interest rate for FD which was opened as Resident for the period after the individual has become NRI inbetween also (ie just before maturity? FD was opened in Dec 2014 & maturing in Dec 2017. The individual converted his Resident account to NRO account just 6 months back before maturity.
A very fantastic post to read. You have mentioned some very important points.Good job. Keep it up.
Hello Kirti
I think in case of NRE, joint holding with a resident who is a close relative is allowed. Also, NRE account can also be opened by PIO – only restriction is on the Bangladesh and Pakistan nationalities where RBI approval is required. Please check.
Thanks for info. Have updated the article.
I am NRI with NRE, FCNR and NRO accounts in India. I am showing the interest earned in NRO account including the tax deducted by the bank in my Income teax return. No issues
What about the interest received from NRE accounts? Should I need to mention these accounts in income tax return form. If so, since it is exempt from tax where in ITR form it should be disclosed?
Similarly I have NRE and FCNR deposits that matured during that financial year. Should I need to show these interest earned on maturity? If so, since it is exempt from tax where in ITR form it should be disclosed?
There has been existence of NRI banking in the last decade. It provides large exchange foreign currency compare to the Indian INR currency. It leaves Indian economy with huge amounts of returns which help in the welfare development
There has been existence of NRI banking in the last decade. It provides large exchange foreign currency compare to the Indian INR currency. It leaves Indian economy with huge amounts of returns which help in the welfare development
how mutch I have pay tax on interest earned of Rs. 87000/- on nro a/c and I don,t have any other income?
Hello Naveen
Tax at a rate of 30.90% will be deducted at source on interest earned in the NRO accounts irrespective of the amount of interest which is approximately 26,883 Rs
Check it in Form 26AS.
As your total income in India is less than basic exemption limit of 2 lakh you don’t need to pay any tax.
You can claim TDS cut by filing for refund.
how mutch I have pay tax on interest earned of Rs. 87000/- on nro a/c and I don,t have any other income?
Hello Naveen
Tax at a rate of 30.90% will be deducted at source on interest earned in the NRO accounts irrespective of the amount of interest which is approximately 26,883 Rs
Check it in Form 26AS.
As your total income in India is less than basic exemption limit of 2 lakh you don’t need to pay any tax.
You can claim TDS cut by filing for refund.
Hi Team,
I have a question around NRE/NRO accounts. Recently, I moved out of India for a job outside of India. Now, I send money home into my normal savings account through remittance.
I want to know, do I still need to open a NRE/NRO account? or is it fine to use my existing savings account for money transfers?
Does it involve additional tax compliance?
I have another question, since, I ll not be in India for a long time. Do I still need to pay tax(file ITR), as my I dont have any other income than interests that I get from savings account?
Regards
Yogi
Yes you do need to type of your account.
Following links might be of help to you
Know what you should do to organise your financial portfolio at home before moving abroad
Here is what you must do as part of preparations for moving to another country
Hi Team,
I have a question around NRE/NRO accounts. Recently, I moved out of India for a job outside of India. Now, I send money home into my normal savings account through remittance.
I want to know, do I still need to open a NRE/NRO account? or is it fine to use my existing savings account for money transfers?
Does it involve additional tax compliance?
I have another question, since, I ll not be in India for a long time. Do I still need to pay tax(file ITR), as my I dont have any other income than interests that I get from savings account?
Regards
Yogi
Yes you do need to type of your account.
Following links might be of help to you
Know what you should do to organise your financial portfolio at home before moving abroad
Here is what you must do as part of preparations for moving to another country