A non-resident Indian according to RBI cannot open and operate a traditional resident Savings Account. They should be changed to an NRI Account by the bank before gaining an NRI status. An NRI needs to open a Non-Resident External or Non-Resident Ordinary Account to conduct any banking transactions in India.
The NRI or PIO (Person of Indian Origin) can open an NRE or NRO Account, or both, based on their transactional needs. As an NRI, your financial management and planning would be significantly impacted once you open NRI Account online. Even your standard account in India is subject to new laws and regulations. If you are wondering if you can continue holding a resident account in India once you earn NRI status, the answer is no.
Importance of NRE or NRO Accounts
An NRI cannot create or manage a standard resident Savings Account in India, according to the regulations of RBI. As soon as your residential status changes, the account you own should change to an NRI Account. To manage any banking transactions in India after becoming an NRI, you should open an NRE and NRO Account. NRIs should open these accounts to further deposit their foreign earnings and any domestic profits like rent, fees, dividends, pensions, etc.
The NRI interest rates on your deposits in the NRE Account are tax-free and freely remittable to your home country because they get generated outside of India. The interest accumulated in an NRO Account is taxed, though.
Tax Deducted at Source applies to the interest at 30%. Also, the maximum amount that can be repatriated is USD 1 million per financial year. It is of utmost importance to open an NRO Savings Account or convert your current account into an NRO if you are an NRI with income in India. Once you have effectively opened an NRO Account, you can easily manage and organise your revenue from India.
Lastly, do not forget to deposit and save funds in your NRE Account once you have decided to move abroad. Although it is not required, the purpose to open these NRI Accounts is to maintain your local savings under your name.
Conclusion
NRO Accounts may be more practical if you frequently deal with investments in India and continue receiving credits from income sources within India. NRE Accounts rank better concerning simplicity and tax-exempt status. After considering the mentioned aspects, NRIs should make an informed decision regarding opening an NRI Account.
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