Prakash (Lawyer) 01 January 2008
Which Bank Accounts can be operated by an NRI?
Indian banking system allows three types of accounts for person residents outside India specially created for non resident Indians. NRIs . The bank accounts that can be operated are:
1. Foreign Exchange Non Resident Account(FCNR)
2. Non Resident External (rupee) Account (NRE)
3. Non Resident Ordinary Account (NRO )
Some of the important points are summed up below for the general knowledge of readers. They can get more on this from their respective banks.
1. Who can open these accounts?
While FCNR and NRE accounts can be opened by only Non Resident Indian, the NRO account can be opened by any person resident outside. He need not be an NRI.
2. What types of account can be opened and for what period?
FCNR is a term deposit only and can be for not less than one year and not more than one year. NRE and NRO accounts can be savings account or recurring accounts or term deposits and there is no time limitation.
3. In which currency, can these accounts be operated?
While NRE and NRO are rupee account, FCNR is not a rupee account. FCNR can be opened and operated in US dollar, Pound, Japanese Yen and Euro.
4. What about taxation of interest?
The interest on NRO is fully taxable and subject to TDS. Interest out of FCNR is tax free.Interest out of NRE is also tax free as long as the NRI is not a permanent resident. After his becoming permanent resident of India, interest is taxable.
5. Can amounts out of those accounts be repatriated?
Yes. Both NRE & FCNR allow you to repatriate amounts both principal as well as interest without any restriction. However, one can repatriate principal amount equivalent to 1 million USD per calendar year. Interest is freely repatriable out of NRO account.
6. What happens when the residential status of the account holder change?
In case a non resident returns to India, FCNR & NRE accounts have to be converted to Resident Foreign Currency account. NRO accounts have to be converted as residents account.
7. Can we get loans against the balance in these accounts?
Yes, in case of FCNR account, one gets loans or overdraft whether in India or outside India. The loan can be either in rupee or designated currency in which FCNR can be operated. However, NRE and NRO account allow you only rupee loan. NRE account gives you facility to draw loan outside India whereas the NRO does not give such facility.
DMC (Student) 03 January 2008
First of all, thank you for such a useful post. I have few questions.
Firstly an NRI can repatriate USD 1 Million per year is this limit on one account or all the accounts put together For eg I have two bank accounts so can I remit USD 1 Milllion in each account or both the accounts put together.
Also I had asked a CA earlier is there a limit on the amount of foreign remittances an NRI can bring into the country and he replied no. So is the information on the 1 Million USD limit correct