Types of bank accounts an NRI can open in India (2024)

FAQs

Types of bank accounts an NRI can open in India? ›

As mentioned earlier, there are three types of accounts available to NRIs in India – NRE stands for Non-Resident External Account, NRO stands for Non-Resident Ordinary Account, and FCNR (Foreign Currency Non-Resident) bank Account.

As mentioned earlier, there are three types of accounts available to NRIs in India – NRE stands for Non-Resident External Account, NRO stands for Non-Resident Ordinary Account, and FCNR (Foreign Currency Non-Resident) bank Account.

Therefore, to answer the initial question, no, an NRI cannot hold a resident savings account in India.

An RFC (Resident Foreign Currency) Savings Account is a savings account maintained in foreign currencies - USD and GBP - for NRIs who have returned to India and hold funds in foreign currency.

An NRE account can only be opened by a person of Indian Origin or a person who has become a non resident under FEMA.

You should opt for NRE Accounts if you want to hold or maintain your overseas earnings in Indian currency. NRE Accounts are also suitable if you wish to keep your savings liquid. You should opt for NRO Accounts if you want to save your earnings from India in Indian currency itself.

An NRE account can be used as a bank account to transfer foreign earnings to India in Indian rupees. An NRO account can be used as a savings account to manage the income earned in India by an NRI in Indian rupees. This can include pension, rental income, dividend income, etc.

What are the disadvantages of NRO account? ›

Limitations of NRO Accounts

One of the major disadvantages of an NRO account is the cap of USD 1 million on the repatriation of funds. Moreover, the interest income of an NRO account is also subject to taxes.

2. Can an NRI maintain multiple accounts with different banks in India, simultaneously ? Ans.: Yes, there is no prohibition to open and maintain multiple accounts a/cs.

As of the financial year 2021-2022, the LRS limit for NRIs is INR 2,50,00,000 per financial year. This limit applies to the total amount of funds transferred by an NRI during the financial year, and includes all transfers made for any purpose, including investments, gifts, and personal expenses.

Account can be opened by direct remittance from abroad, transfer from existing NRE, FCNR(B) accounts or with foreign currency note, travellers cheque tendered personally by NRIs during their visit to India.

You can, but this is tricky. Non-resident accounts are only available to Non-Resident Indians (NRIs), Persons of Indian Origin (PIOs) and Overseas Citizens of India (OCIs)¹. If you don't fall into any of these categories, you'll need to be living in India before you can open an account.

Yes, and that's the best option. As soon as you become an NRI, convert the existing resident saving bank account into an NRO account and transfer your deposits there. Though it is not mandatory to open an NRO account, if you want to keep your local savings in your name, that's the only option.

According to Article 15 of the DTAA, a person who is a particular country's resident but has income from a foreign country source, his income would be taxed 'only' in the residential country. This means if an NRI works in the US and his income comes from an Indian source, he has to pay only US taxes.

A Non-Resident External (NRE) account helps an NRI store their foreign currency savings in an Indian bank. Using an NRE account, an account holder can deposit money in any foreign denomination and withdraw it in INR (Indian Rupees).

Can I deposit cash in my NRE account? Yes, you can deposit cash in your NRE account, provided the deposits are in specific foreign currencies, as permitted by the RBI. Since the NRE account is rupee-dominated, the deposits are converted to INR.

Do NRE accounts need to pay tax in India? ›

Income which is earned outside India is not taxable in India. Interest earned on an NRE account and FCNR account is tax-free.

Interest in an NRE account is not taxable in India.

Additionally, a penalty of Rs 5,000 is to be charged every day from the first day of intervention until the penalty is paid.” These are the documents required for conversion of savings account to NRE account, according to the HDFC Bank website. Self-attested copies of passport and Visa to prove his/her NRI status.

Any amount which is remitted to India from abroad through proper banking channel can be credited in the NRO account. NRI can deposit foreign currency upto $5,000, while in India, duly supported by currency declaration form. Money can also be transferred to NRO account from NRO account of any other NRI.

An NRE Account or Non-Resident External Account offers you this facility. Here, your money is converted into Indian Rupee or INR at the time of deposit. This means that you can deposit money in any foreign denomination, e.g. US Dollar and withdraw it in Indian Rupees.

Non-Resident Indians (NRIs) can repatriate a maximum of $1 million without paying any tax on money transfers from India to the USA. The reason is, as per Section 206C(1G) of the Income Tax Act, there is no applicable TCS when NRIs transfer money from their NRO to their NRE account.

Earlier, the Finance Act 2023 had announced that all outbound remittances, irrespective of the amount, will be liable to tax. Effective July 1, 2023, the Indian government has increased the tax on outbound remittances from five percent to 20 percent, as per the amended Income-tax Act, 1961.

Penalties for not converting to NRO account

Under the Act, any individual who fails to adhere to the guidelines is liable to pay a penalty of up to 3 times the amount involved in the existing resident savings account or Rs 2 lakh when the sum is not quantifiable.

HDFC Bank offers interest rates in the range of 6.60 percent to 7.10 percent for amounts below Rs 2 crore to general citizens. The rates are effective from February 21, 2023. Note minimum tenor for NRE Deposit is 1 year. ICICI Bank offers interest rate between 6.70% to 7.10% on tenures ranging from 1 years to 10 years.

What is the minimum balance for NRE NRO account? ›

You need to maintain a monthly average balance of INR 10,000 at account level or INR 25,000 at Customer ID level. If you are unable to maintain this minimum Monthly average balance at Savings account level, service charges will be levied.

Can TDS payment be avoided on NRO accounts? The deduction of TDS from the interest earned on the NRO account cannot be avoided. However, NRIs are eligible to receive a tax deduction on interest income of up to Rs 10,000 on a savings account during a financial year under Section 80TTA of the Income Tax Act, 1961.

Tax rules for interest income from NRO account

For those wondering, “is an NRO account taxable”, the answer is yes. In India, the interest earned on deposits in NRO accounts is fully taxable. The interest income on funds in an NRO account is subject to tax deducted at source (TDS).

You should convert/re-designateor close your NRE account after the return, on a priority basis. If you fail to convert your NRE account within 3 months of the return, it will be considered as a violation of Foreign Exchange Management Act (FEMA) and attract a penalty.

Returning NRIs can save tax on their overseas income through their Residential Status until a period of 3 years after return. You may be curious to know more about that. This article is an attempt to clarify the tax implications for NRIs returning back to India.

NRE accounts are ideal for inward remittances (foreign earnings) and freely repatriable. However, upon your return to India permanently, you will have to convert your existing NRO / NRE savings account and deposits into resident savings account and deposits.

Once you come back to India permanently, you are a resident as per FEMA. And residents are not permitted to keep a NRE account. Interest on NRE FD is tax exempted only for Non-Residents. Therefore from the day you come back to India any interest earned in NRE FD becomes taxable in your hand.

Amount of money I can transfer from the USA to India

According to the US Treasury Department, the Financial Crimes Enforcement Network (FinCEN) requires that financial institutions must file a Currency Transaction Report (CTR) for transactions which are over $10,000.

To transfer money from USA to India online, you can avail of the telephonic or wire transfer facility. The Indian bank will have correspondent banks through which such a transfer takes place. If your bank is part of the SWIFT network, the money can also be transferred through SWIFT.

A resident individual may send up to $2.5 lakh in a year. An NRI with a Non-Resident Ordinary (NRO) account may send up to $10 lakh in a financial year. An individual with a Non-Resident External (NRE) account or a Foreign Currency Non-Resident (FCNR) Account does not have any such limits.

Can NRI open both NRE and NRO account? ›

Yes, an individual can open both NRE and NRO accounts to meet his needs. If you have any income arising in India, you can receive it in NRO account, and if you want to park your earnings abroad in India, you can open an NRE account.

You should opt for NRE Accounts if you want to hold or maintain your overseas earnings in Indian currency. NRE Accounts are also suitable if you wish to keep your savings liquid. You should opt for NRO Accounts if you want to save your earnings from India in Indian currency itself.

The earning received through your NRO account is taxable at 30 % plus applicable surcharge and cess.

You can use an NRE bank account to store foreign currency converted to Indian rupees, while an NRO account is used to keep both foreign income and money earned in India. NRO accounts have a limit for repatriation up to USD 1 million per financial year, but NRE accounts have no such limit.

The foreign income i.e. income accruing or arising outside India in any financial year is liable to income-tax in that year even if it is not received or brought into India.

A Non-Resident External (NRE) account helps an NRI store their foreign currency savings in an Indian bank. Using an NRE account, an account holder can deposit money in any foreign denomination and withdraw it in INR (Indian Rupees).

All transactions made through an NRE Account must be between India and a foreign country, meaning domestic transactions are prohibited. As the currency of the account is usually based on Indian Rupees, there is the risk of currency fluctuations when transferring funds.

An NRE account is a bank account opened in India in the name of an NRI, to park his foreign earnings; whereas, an NRO account is a bank account opened in India in the name of an NRI, to manage the income earned by him in India. These incomes include rent, dividend, pension, interest, etc.

Another question you may have is- can I deposit money in NRE account from India? You cannot transfer money to a NRE account from a savings account in India. However, you can transfer money from NRO to NRE account. You can also transfer money from one NRE account to another.