FAQs on NRI

1. What are the different types of accounts that an NRI can open in India?

NRI can open the following accounts:

• 01. In Rupees:- NRE & NRO ( Savings, Current & Deposit)
• 02. In Foreign Currency: - FCNR (Deposit)

2. What is an NRO account?

Non-Resident Ordinary Rupee Account (NRO Account)

• Any person resident outside India (NRI/PIO) may open NRO account with an authorized bank for the purpose of putting through a bonafide transaction in rupees.

• Opening of accounts by individual/ entities of Pakistan and entities of Bangladesh require prior approval of Reserve Bank of India.

• NRO accounts may be opened / maintained in the form of current, savings, recurring or fixed deposit accounts.

• NRI / PIO may be permitted to open NRO account with their resident close relatives on ‘former or survivor ‘basis. The resident close relative shall be eligible to operate the account as a Power of Attorney holder in accordance with the extant instructions during the lifetime of the NRI / PIO account holder.

• Savings Account - maintained for crediting legitimate dues / earnings / income such as dividends, interest, etc.

• Term Deposits - Banks are free to determine the interest rates. Interest rates offered by banks on NRO deposits cannot be higher than those offered by them on comparable domestic rupee deposits.

• Account should be denominated in Indian Rupees.

• NRO (current / savings) account can also be opened by a foreign national of non-Indian origin visiting India, with funds remitted from outside India through banking channel or by a sale of foreign exchange brought by him to India.

• Balances held in the NRO account is not freely repatriable.

3. What is a NRE account?

Non-Resident (External) Rupee Account (NRE Account)

• NRE account may be in the form of savings, current, recurring or fixed deposit accounts (with a maturity of minimum one year). Such accounts can be opened only by the NRI himself and not through the holder of the power of attorney.

• NRI / PIO may be permitted to open NRE account with their resident close relatives (relative as defined in Section 6 of the Companies Act, 1956) on ‘former or survivor ‘basis. The resident close relative shall be eligible to operate the account as a Power of Attorney holder in accordance with the extant instructions during the lifetime of the NRI / PIO account holder.

• Account will be maintained in Indian Rupees.

• Balances held in the NRE account are freely repatriable.

• Accrued interest income and balances held in NRE accounts are exempt from Income tax and Wealth tax, respectively.

• Term deposits - Banks are free to determine the interest rates of term deposits of maturity of one year and above. Interest rates offered by banks on NRE deposits cannot be higher than those offered by them on comparable domestic rupee deposits.

• Such accounts can be operated through power of attorney in favour of residents for the limited purpose of withdrawal of local payments or remittances through normal banking channels to the account holder himself.

4. What is an FCNR account?

Foreign Currency Non-Resident (Bank) Account - FCNR (B) Account

• NRI/PIO are eligible to open and maintain these accounts.

• FCNR (B) accounts are only in the form of term deposits of 1 to 5 years.

• Account can be held in any freely convertible currency. i.e USD, GBP, EUR, JPY, AUD and CHF.

• When an account holder becomes a person resident in India, deposits may be allowed to continue till maturity at the contracted rate of interest, if so desired by him.

• NRI can open a joint account with a resident close relative (relative as defined in Section 6 of the Companies Act, 1956) on former or survivor basis. The resident close relative will be eligible to operate the account as a Power of Attorney holder in accordance with extant instructions during the lifetime of the NRI / PIO account holder.

5. Is the permission of the Reserve Bank required for opening the NRE/NRO & FCNR accounts, by Bangladesh / Pakistan individuals/entities?

Opening of accounts by individuals / entities of Pakistan and entities of Bangladesh nationality requires prior approval of the Reserve Bank. All such requests may be referred to the General Manager, Foreign Exchange Department, Central Office Cell, Reserve Bank of India, 6 Sansad Marg, New Delhi - 110 001. However, individuals of Bangladesh nationality are permitted to open NRO accounts without the prior approval of Reserve Bank of India, subject to conditions.

6. Can an NRI maintain multiple accounts with different banks in India, simultaneously?

Yes, there is no prohibition to open and maintain multiple accounts.

7. Can an NRI open joint accounts with one or more NRIs?

Yes.

8. Can NRI accounts be opened from abroad also?

Yes. An NRI Can also open accounts from abroad by sending duly filled and signed AOF duly attested by Indian Consulate along with attested copies of relevant pages passports and overseas address proof.

9. Can an NRI open an account with Zero balance?

Yes, an individual taking up employment, business, vocation, etc. can complete the account opening formalities prior to going abroad with zero balance. Subsequently, he must remit funds to make the account operative within a reasonable time.

10. Can any person in India be authorized to operate the NRE / NRO / FCNR (B) account?

Yes, the NRI can authorize resident Indian to operate your account by way of giving suitable Power of Attorney (POA).

11. Can an NRI deposit local funds into NRE account?

No, only credits coming from abroad in the form of DDs/TTs/MTs/FCs/TCs etc. can be deposited in NRE a/c. Local money has to be credited to NRO account of an NRI.

12. Is interest earned on NRE/FCNR/NRO accounts taxable?

No tax is applicable to interest earned on NRE & FCNR accounts. However, interest earned on NRO accounts is subject to TDS as per extant guidelines.

13. What is the rate of TDS on NRO accounts?

Banks have an obligation under Sec. 195 of Income Tax Act, 1961to deduct tax at source in respect of interest income of Non-Resident Indians. The rate of TDS is specified in the Finance Act, every year. Accordingly, as on date TDS applicability is as under:

• Interest earned up to Rs. 10 lakhs - TDS @ 30.90% inclusive of Educational Cess & Surcharge

• Interest earned beyond Rs. 10 lakhs - TDS @ 33.99%inclusive of Educational Cess & Surcharge

However, the applicability of TDS is subject to the Double Taxation Avoidance Agreement (DTAA) that India has entered with many countries. Refer the link to understand the TDS rates under DTAA.

http://www.frs.com/circular/2011/2011438ODCR.pdf

14. Is interest on NRO account repatriable?

Yes, interest earned on NRO accounts can be repatriated or credited to NRE/FCNR accounts subject to payment of tax.

15. If the NRE / FCNR & NRO deposits are withdrawn before the maturity date, what will be the loss?

• If the deposit has not run for the minimum maturity - No interest.

• Otherwise, the interest at the rate applicable for the period the deposit has run less 1%. is paid.

16. Is nomination permitted in NRI accounts?

Yes, NRIs can nominate either a resident or a non-resident as Nominee. However, only one nominee is permitted per account. The nominee can also be a minor in which case. Guardian has to be appointed to receive payment on minor’s behalf.

17. Can an NRI account be opened or maintained along with Resident Indian (Domestic) account?

In order to open NRI account, the existing Resident Indian (domestic) account (s) either needs to be converted into NRO account or to be closed down. An NRI cannot maintain a domestic account.

18. Which type of funds can be deposited in NRO account?

Funds as detailed hereunder can be deposited to NRO account:

• Transfer from another Resident Indian / NRE / NRO / FCNR (B) account.

• Fresh remittance from abroad through banking channel.

• Personal cheques drawn on foreign accounts.

• Proceeds of Foreign Currency Notes /Travelers’ cheques tendered by NRI / PIO / OCI, while visiting India. Amounts in excess of USD 5000 (or equivalent) in currency or USD 10,000/- (or equivalent) in Travelers’ cheques should be accompanied by a Currency Declaration Form.

• Interest, dividend and maturity proceeds of investments made in India etc. on a non-repatriable basis.

19. Which type of funds can be deposited in NRE account?

Funds as detailed hereunder can be deposited to NRE account:

• Transfer from another NRE / FCNR (B) account.

• Fresh remittance from abroad through banking channel.

• Personal cheques drawn on foreign account.

• Proceeds of Foreign Currency Notes /Travelers’ cheques tendered by NRI / PIO / OCI, while visiting India. Amounts in excess of USD 5000 (or equivalent) in currency or USD 10,000/- (or equivalent) in Travelers’ cheques should be accompanied by a Currency Declaration Form.

• Drafts issued by bank / exchange companies abroad.

• Interest, dividend and maturity proceeds of investments made in India etc on repatriable basis.

• Transfer from another NRO account subject to limit of 1 million USD provided the tax liabilities on the said funds is cleared along with 15CA & 15 CB forms to prove the same.

20. What are the differences between NRE and NRO accounts?

Following are the difference between NRE & NRO accounts:

• The interest income earned on NRO attracts TDS, whereas interest income in NRE is TDS free.

• Balances held in NRE accounts can be fully repatriated abroad, whereas funds in NRO account are partially repatriable (up to USD 1 million per financial year, subject to payment of taxes along with the 15 CA & 15CB to prove the payment of Tax on the said fund in India.

• Overseas earnings can be deposited in NRE account whereas in NRO account earnings from overseas as well as Indian sources can be deposited.

21. What is the tenure for the various NRI deposits?

22. Can an NRI open NRE / NRO / FCNR (B) account jointly with Resident?

Yes, NRIs are permitted to open NRE / FCNR (B) & NRO account with their close resident relatives with “former or survivor” operational mode only.

23. Can funds be transferred NRE to NRO account?

• Transfer from NRE to NRO: Transfer of funds from an NRE to an NRO account is permitted. Once the transfer of funds from NRE to NRO account, the funds will not be freely repatriable. Any interest earned on these funds thereafter will be subjected to TDS.

• Transfer from NRO to NRE: Transfer of funds from NRO to NRE account is restricted. Only up to an overall ceiling of USD one million or equivalent is permitted per financial year (April - March), subject to payment of taxes, as applicable and on the production of 15CA & 15 CB certification to prove the payment of taxes on the said fund.

24. How much funds can be repatriated or sent overseas from NRE / NRO / FCNR (B) account?

Funds from NRE / FCNR (B) deposits accounts are fully repatriable without any upper limit. Funds from NRO account are limited to USD 1 million or its equivalent in a financial year.