Compared to residents, NRIs or Persons of Indian Origin (PIO) have different banking and investment requirements. This is due to their dealing with multiple currencies, and their income and savings being in foreign denominations. To fulfil this, NRIs require a special type of bank account that fulfils their unique financial needs while providing them with the means to contribute to the overall Indian economy.
What is an NRI Bank Account?
NRIs accounts are a special kind of bank account helping individuals to manage their finances between India and abroad. Most of the large banks, both public and private, offer services to open NRI accounts. These accounts offer features like repatriation, fund transfers, local payments, etc.
These accounts help manage NRIs' unique needs by letting them hold and convert their earnings into INR. They also come with certain benefits and tax reliefs that are attractive to those who are smart about their finances.
But what are these accounts exactly? Let’s explore this topic in detail.
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Types of NRI Bank Accounts
Governed by the RBI, there are four main types of NRI bank accounts, each with unique features and benefits. These are:
NRE Account (Non-Resident External Account)
NRO Account (Non-Resident Ordinary Account)
FCNR (B) Account (Foreign Currency Non-Resident Account)
- GIFT City Bank Account
NRE Account
NRE Accounts are rupee-denominated accounts that can be opened as savings or current accounts used by NRIs to park their foreign income in India. These accounts have the unique benefit of having no taxation on interest earned (as per Section 10(4)(ii) of the Income Tax Act).
NRO Account
NRO Accounts are rupee-denominated accounts for depositing domestic income (i.e. income earned in India) such as rent, dividends, interest income, etc. Existing Resident Accounts have to be converted to NRO Accounts once the individual’s resident status changes to NRI status. Although used for domestic income, foreign income can also be deposited here, provided it comes through the proper banking channels and is converted to INR before depositing.
FCNR Account
FCNR (B) Accounts are designed for NRIs to park their foreign-generated income under any of the select list of foreign currencies prescribed by the RBI (such as USD, GBP, CAD, to name a few). These accounts can only be opened as Fixed Deposit (Term Deposit) Accounts wherein the interest earned on these deposits is tax-free, fully repatriable, and protected from INR depreciation.
GIFT City Account
GIFT City is a financial services special economic zone (SEZ) located in Gujarat. According to FEMA, GIFT City is treated as an offshore jurisdiction. This means GIFT City is like a small, separate country within India that is treated as a foreign country for financial transactions.
All the bank accounts and financial products in GIFT City are denominated in international currency, such as the USD. The offshore status of the GIFT City allows for easy repatriation of gains to the NRI’s country of residence.
Comparison of NRE, NRO, FCNR and GIFT City Accounts
As mentioned previously, there are four main types of NRI Accounts that you should be aware of. These accounts and key aspects/features of which are summarised in the table below:
| Aspect | NRE Account | NRO Account | FCNR Account | GIFT City Account |
| Definition/ Purpose | For parking their foreign income in INR in India. | For managing income earned in India, like rent, interest, dividends, etc. | For holding foreign currency as fixed deposits. This protects the amount from INR depreciation. | For holding foreign currency as fixed deposits or as savings accounts. This protects the amount from INR depreciation. |
| Currency Denomination | INR | INR | Select foreign currencies like USD, GBP, etc. | Select foreign currencies like USD, GBP, etc. |
| Affected by INR depreciation | Yes, because they are converted from foreign currency to INR. | Yes, because they are converted from foreign currency to INR. | No, because funds are maintained in a foreign currency. | No, because funds are maintained in a foreign currency. |
| Taxation | Interest earned is tax-free in India | Interest earned is subject according to tax slab with TDS @30% | Interest earned is tax-free in India | Interest earned is tax-free in India |
| Repatriability | Both principal and interest are fully repatriable. | Principal and interest repatriation is restricted to 1 Million USD | Same as NRE accounts | Same as NRE accounts |
| Joint Account Facility | Permitted with NRI or a resident Indian | Permitted with NRI or a resident Indian | Permitted with NRI or a resident Indian | Permitted with another OCI/NRI |
| Fixed deposit tenures | Fixed deposits with tenure greater than a year available | Fixed deposits with shorter tenure lesser than a year available | Fixed deposits with tenure greater than a year available | Fixed deposits with shorter tenure lesser than a year available |
Eligibility: Who Can Open an NRI Account?
Since these accounts were developed for non-residents, you must first qualify as either a non-resident Indian, a person of Indian origin or an OCI (overseas citizen of India) to open an NRI account. The overall criteria for opening an account are relatively straightforward and involve the following aspects:
NRI Status: You must qualify as belonging to any of the following statuses: NRI, POI, or OCI, as per official recognition from the Indian Government.
Duration of Stay: As per FEMA regulations, you are an NRI if you have moved outside India for employment or other purposes without the intention of returning to India permanently.
Age: You must be 18 years old (or older) to open an NRI account. However, minors can have NRI accounts in their names opened by their guardians.
Documentation: You must have valid documentation proving their identity and NRI status. Required documents can include a valid passport, visa, and proof of residence (abroad).
How to open an NRI bank account?
On changing the status from resident Indian to NRI, the NRI needs to convert their resident savings account to an NRO/NRE account. This requires doing a re-KYC. This re-KYC process is similar to the fresh KYC process for opening a new bank account.
The account opening process is largely similar across NRE, NRO, and GIFT City accounts.
Documents Required
- Valid Passport: First and last four pages, clearly showing your name, photo, date of birth, place of issue, and signature.
- Valid Visa/Work Permit/Overseas Resident Card: Proof of your NRI status in the UAE.
- Permanent Account Number (PAN) Card: Mandatory for financial transactions in India. If you don't have one, you might need to fill out Form 60.
- Proof of Overseas Address: Utility bill, driving license, bank statement, or any government-issued ID showing your current UAE address.
- Passport-sized Photographs: Recent ones, adhering to bank guidelines.
- Initial Payment: A cheque or draft from your own account to activate/authenticate the account.
Specific documents may vary from bank to bank. Please check with your bank.
Notarisation Process
The KYC documents need to be attested/notarised by authorised personnel of overseas branches of Indian banks, an overseas Notary Public, a Court Magistrate, a Judge, or the Indian Embassy/Consulate in the UAE.
Account Opening Process
The account opening process is largely offline. Some banks offer a partial online process where the applicant has to fill out the account opening form online. After this, the applicant has to courier the KYC documents to the bank branch or physically submit the documents in the branch office.
The individuals need to visit the branch and fill out the account opening form. Along with this need to submit the notarised KYC documents or courier the documents to the bank branch.
Why NRI Accounts are Important?
NRI accounts are a crucial tool non-residents to use to maintain and manage their finances in India. The four types of NRI accounts mentioned each serve their distinct purpose and, accordingly, come with their benefits and use cases. Whether it's the tax benefits of NRE and FCNR accounts or the ability to manage domestic income through an NRO account, these options cater to a wide range of unique financial requirements.
