NRIs are allowed to hold three types of bank accounts and deposits in India. These accounts carry different features and, accordingly, may be suitable for different transactions.
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Non-Resident Indians are allowed to hold three types of bank accounts and deposits in India – NRE accounts, NRO accounts, and FCNR (B) deposits. These accounts carry different features and, accordingly, may be suitable for different transactions. Here is a summary of the features of each type of accounts:
1. NRO Account: This stands for Non-Resident (Ordinary) Account and is denominated in Indian currency. When any remittance is received in such accounts in foreign currency, such amount is converted into Indian Rupees at the prevailing exchange rates and credited to the account. Such accounts can receive remittances in foreign currency from outside India and transfer from any Indian bank account in Indian currency. One can use NRO accounts to receive income from sources within India, e.g., dividend income, investment income, rental income, etc. Similarly, an individual can use NRO accounts to receive the maturity proceeds for investments made within India. Thus, such accounts are most flexible for receiving funds, irrespective of the sources, whether from India or outside India. However, such accounts do not provide free repatriability of the account balances, and one can only transfer the funds subject to specified limits under FEMA Regulations. When the residential status changes from resident to non-resident, the existing savings and fixed deposits are converted to NRO savings and deposit accounts.
2. NRE Account: This stands for Non-Resident (External) Account and is denominated in Indian currency. Such accounts can be opened by transferring funds from overseas or funding through maturity proceeds of FCNR deposits. NRE accounts are designated to receive only foreign currency remittances outside India and cannot receive any rupee credits. Since such accounts cannot receive credits in Indian currency, such accounts are not suitable for the NRIs if they have any requirement to receive rupee credits in the account. However, NRE accounts carry benefits like free repatriability of funds outside India, tax exemption on interest income, etc. An NRI can hold NRE and NRO accounts simultaneously and use the accounts as per their respective feature.
3. FCNR Deposits: It stands for Foreign Currency (Non-Resident) deposits, wherein the amount invested continues to be denominated in foreign currency. Such accounts can be opened by transferring funds from overseas or any existing NRE/ FCNR accounts with any other bank in India. FCNR deposits are fully repatriable, i.e., transferable outside India without any limits. As per the tax laws, the interest income earned on FCNR deposits is tax-exempt for the account holder. Further, since such deposits continue to be denominated in foreign currency, there is no risk of currency movements if the account holder intends to transfer such investments outside India after maturity.
While NRO accounts are more suitable and flexible in accepting rupee transactions and allowing joint operations with resident Indians, NRE accounts provide benefits regarding free repatriation of account balances and tax exemption benefits in respect of interest income. One may choose the account as per their specific transaction requirements. Similarly, FCNR deposits continue to extend free repatriability of funds to the account holder while eliminating any risk of changes in foreign currency exchange rates.
One can easily open the best NRI account with ICICI Bank suiting the transaction requirements by making a request online. The further process can be completed by physically visiting the bank branch or requesting the branch executive to visit you and collect all the documents. If one is an existing customer of ICICI Bank, such requests can also be made online through internet banking.