What Are The Types Of NRI Accounts?

Every person requires an account to store money which they can use during emergency fund requirements or urgent payments to fulfil their daily needs. Whether you live in India or elsewhere, you require a savings account with unlimited access to funds to meet your requirements. Many Indians travel abroad for a better future and lifestyle. They have many aspirations and want to lead an independent life.

As an NRI, you can open an NRI account if you are residing outside India’s geographical territories for at least 120 days in a year and spend less than 365 days in India in the four previous years. You can maintain your NRI status only if you abide by this condition according to the Income Tax Act, 1961. However, if you leave India for employment in a different nation, you become an NRI immediately.

You need to understand the various characteristics of the three bank accounts available in India. It helps you fulfil your investment objectives, financial obligations, and plans about your residency adequately. Here are the types of savings accounts in detail:

1. NRE account: You can open a Non-Residential External account and maintain it with earnings originating from your country of residence in the Indian Rupee denomination. This type of NRI bank account does not include any taxes on interest and principal amounts. 

2. NRO account: At the time of the NRI account opening, you can open it with the income you earn in India. All the deposits in the Non-Residential Ordinary account take pace in Indian Rupee denominations. The source of income can be rent, dividends, etc. For instance, Mr Rahul, an NRI residing in Newark, USA, has an apartment in Mumbai, which he has leased to Mr Arman. 

To receive rent earnings from such a lease, Rahul must open an NRO account where Arman shall deposit the stipulated rent amount periodically. As deposits in an NRO account occur in rupee denominations, there is no currency conversion involved. Both principal and interest earned are taxable. 

3. FCNR (B) account: When you opt for the Foreign Currency Non-Residential account, it allows you to deposit in your resident country’s currency. But it holds it in any one of the foreign currencies prescribed by the Reserve Bank of India. 

The currencies it supports are US Dollars (USD), Canadian Dollar (CAD), Australian Dollar (AUD), Euro (EUR), Great Britain Pound Sterling (GBP), Singapore Dollar (SGD), Hong Kong Dollar (HKD), Japanese Yen (JPY) and Swiss Franc (CHF). While opening any of these accounts, ensure to check the NRI account interest rates as they differ between banks and account balance slabs.

What Are The Advantages Of Opening An NRI Account?

Money is a valuable resource for people worldwide. They have lots of priorities and expenses to meet, which is impossible to achieve without adequate funds. They need to start saving from the present day to meet emergencies in the future. A bank account is the best option to store funds, earn interest and spend wisely.

An NRI bank account is available for only those individuals residing out of India’s geographical territories for at least 120 days throughout a year and spends less than 365 days in the country in four previous years. Under the Income Tax Act, 1961, an individual’s residential status would change to NRI only if they follow this rule. However, if the person leaves India for employment to a different nation, they will immediately get declared NRI.

NRIs need to understand the features of the three types of NRI savings account opening available for them in India. It helps them fulfil their investment objectives, financial obligations, and plans of residency adequately. They can open them with earnings originating either within India or their resident country, depending on the account type (NRE account, NRO account, or FCNR (B) account). Here are four advantages of opening this account:

1. It facilitates investment in financial instruments: One of the primary benefits of the NRI savings account is that individuals can participate in the stock market and invest in different schemes. These investments, supported by the Portfolio Investment Scheme (PIS), are offered by financial institutions. It is an RBI scheme allowing NRIs to trade in market-linked financial instruments like equity shares and debt instruments like company debentures. 

2. It offers many tax benefits: Individuals with NRE accounts and FCNR (B) accounts are eligible to enjoy tax-free interest earnings on their income, according to the Income Tax Act, 1961. Such global profits will be taxable in India under their domicile or residence if an NRI does not bear a tax liability to any other country, as per the Union Budget 2020 proposal. 

3. It offers high returns: An NRI account can help individuals earn substantial returns on the total deposits in NRE FDs and FCNR accounts at negligible risks without worrying about stock market fluctuations.
   
   
4. They can avoid exchange rate fluctuations: Individuals can choose to deposit their earnings from a foreign country in an FCNR account without conversion into INR. This facility allows NRIs to avoid exchange rate fluctuations and consequent reduction in the deposit value. However, they must remember to check the NRI account interest rates for getting additional benefits.

6 Tips for NRIs To Manage Their Finance

Foreign countries have attracted Indians since forever, with them wanting to visit and probably settle in one of them permanently. For some people, this dream converts into reality, and they plan on becoming NRIs. It is a personal choice whether one wants to be an NRI or not.

The status of an individual as an NRI is different under the Foreign Exchange Management Act and the Income Tax Act. According to FEMA, they become a non-resident when they plan to move overseas professionally or for an indefinite period. They need to revise their bank accounts and convert them into an NRI account for easy transfer and access to money. Here are some tips to help manage your finance:

1. Revision of bank accounts: NRIs who still have income sources in India, for instance, income from ancestral property or a rented-out property, can keep the money in India by opening an NRO bank account.  Get all existing resident bank accounts redesignated to NRO accounts. Moreover, if there are multiple accounts, consolidate them and then convert them into NRO accounts.
   
   
2. Currency rate fluctuations: Those who wish to invest using their NRI bank account should make a note of the currency rate fluctuations which can affect the returns on the investment. A slight change in the value of Indian Rupee against foreign currency can have a significant impact on the rate of returns.
   
   
3. Redesignate Demat accounts: Before thinking of NRI account opening, consider liquidating the equity and investment portfolio or seek professional advice. There are many methods of doing so, including setting up a PIS account to continue gaining exposure even after becoming an NRI.
   
   
4. Mutual fund investments: The NRE account is non-taxable as compared to the NRO account, which is subject to tax as per the applicable rate. Update the KYC status after becoming an NRI and update the portfolio to avoid mismatches. The NRO account include taxes upon repatriation of mutual funds along with other restrictions.
   
   
5. Get a thorough knowledge of the taxation process: While opening an NRI savings account, all applicants should have a thorough understanding of the taxation procedure of both the countries. As an NRI, they need to abide by the tax laws of both countries: where they reside and in India. The tax deduction benefits in India are similar for both NRIs and the residents.
   
   
6. Get a Forex card: These are prepaid cards that individuals can use while making payments abroad. They have funds pre-loaded in them in the required regional currency. It enables users to withdraw cash in foreign currency, check the account balance, and shop. Also, check the NRI account interest rates on term deposits.

6 Advantages Of An NRI Account

People love travelling and exploring new things all around the world. They are always searching for better opportunities for growth and development. They aim at progress and prosperity in their lives. They have some goals and aspirations to achieve and try to make the best use of every chance in life.

When they settle abroad for work or even go there for a vacation, it is safer to be financially prepared. Emergencies and alerts come without warning, whether in India or any country in the world. They can always secure themselves financially by opening an NRI savings account to help them meet their expenses while they are away from their parents residing in India.

There are different kinds of an NRI account to guide Non-resident Indians of different residential statuses. They can open an NRE or an NRO account and enjoy the benefits they offer. According to the Indian government, an NRI is a person who has not stayed in India for a year because the primary source of income and employment is abroad.

Here are the advantages of opening the account:

1. Tax advantages: It is the most significant motive and gain of opening an NRE account. Interest earned on this type of NRI bank account as well on NRE fixed deposit exempts tax in India. They are not added up even in the taxable profits and helps in gaining revenue in India.
   
   
2. Repatriation advantages: Another advantage of NRE account is repatriation. It allows trouble-free movement of cash because it is possible to repatriate both interest and principal overseas. Cash amounts in NRE accounts are fully and completely repatriable.
   
   
3. Low balance required: Nowadays, most of the private and public sector banks have low balance requirement for NRI account opening. The minimum balance requirement is as low as INR 10,000.
   
   
4. Convenience: Another advantage of foreign currency account is handiness. Most of the banks allow individuals to open them online via the Internet. They need to fill a form online, take a printout, and affix the self-attested print of necessary papers and send to the bank in India.
   
   
5. Joint holding: The account allows individuals to apply jointly with relatives having a resident status. They must file a declaration of the status of the NRI and submit the necessary documentation as asked by the bank.
   
   
6. Accessibility: The saving account for NRI typically comes with an International Debit card. It gives convenience benefit of shopping globally, booking air tickets online, buying life insurance, and withdrawing cash abroad. They must also check the NRI account interest rates before applying for any term deposit scheme in the concerned bank. They can always use the bank’s website or app to apply for it no matter where they are.

Essential Facts You Should Be Aware Of Concerning NRI Banking

 Most of the Indian banks nowadays offer NRI account to their consumers living overseas. NRIs have the option to choose between three basic accounts – NRE, NRO, and FCNR accounts. These accounts make it easier to manage your savings seamlessly and conveniently. However, since all NRI bank accounts come with different features and benefits, here are some facts you should be aware of.

Types of accounts

As an NRI, you can open four different kinds of NRI bank account. These are –

• NRE account
• NRO account
• FCNR account
• RFC account

Salient features

Before you do the NRI account opening, you must consider your requirements. The basic features include –

• You will need an NRE account if you want to park your savings in foreign currencies. The funds parked in the accounts and the interest earned on the same are freely and fully repatriable.
  
  
• If you are staying overseas but have investments and a good source of income, you need an account where you can save funds in INR. In such scenarios, you should open an NRO account. In such accounts, you can only repatriate the interest earned on the savings, according to RBI limitations. Also, you need to pay TDS on the savings parked.
  
  
• If you hold enough savings in foreign currencies, you can open an FCNR account and earn decent interest rates on them without worrying about the currency fluctuations.
  
  
• If you seek to return to India at a later point and park the foreign currencies in the NRI savings account, you can open the RFC account for eliminating risks associated with currency fluctuations.

Opening of account

According to the NRI services, most prominent Indian banks allows the consumers to open their NRI account online. You can visit the preferred bank website, select the type of account you seek to open, fill the form, and attach documents. Some banks may ask to provide proof of the NRI status, which you get from the Indian Embassy of the country you are living in. You can also open this account by visiting your preferred bank with the essential documents whenever you visit India. While most banks offer these services, you should check if the bank has an RBI authorisation and the necessary license for dealing with foreign currencies. Open such accounts irrespective of the international country you reside in.

Facilities available

As an NRI, you can save your foreign earnings in any of the mentioned NRI bank account. You can conduct different transactions. Like with most of the accounts, you can NRI net banking facility which helps you do a range of online transactions. For instance, you can easily send funds to your family in India or make fixed deposits out of the savings through internet banking. You can seamlessly transfer money from one account to other and pay for the expenses in India or overseas through net banking.