What is the meaning of an NRI bank account?

NRI Bank Accounts are special accounts designed for non-residents to cater to their unique financial requirements. These accounts help manage these needs by allowing NRIs to hold and convert their earnings into INR, and come with distinct features and tax benefits.

What are the different types of NRI accounts?

There are three main types of NRI bank accounts: NRE Account (Non-Resident External Account), NRO Account (Non-Resident Ordinary Account), FCNR (B) Account (Foreign Currency Non-Resident Account.

Can an NRI open a regular savings account in India?

No, an NRI cannot open or continue to hold a regular resident savings account in India. As per RBI regulations, once an individual’s residential status changes to NRI status, any existing resident savings account must be converted to an NRO account.

What is the difference between NRE and NRO accounts?

The differences between these types of accounts lie in their purpose, degree of taxation, repatriability and joint account facility. NRE account is for those who wish to park their foreign income in India, whereas NRO accounts are used for those who wish to manage their income earned in India. Interest earned in an NRE account is not subject to taxation, whereas interest earned in an NRO account is subject to taxation (TDS applies). Both principal and interest is fully repatriable without limitation in an NRE account, whereas principal repatriation is restricted to 1 Million USD and interest is fully repatriable in an NRO account. While joint accounts are permitted only with another NRI for NRE accounts, NRO accounts permit joint accounts to be made with another NRI and a Resident of India, provided that they are a close relative.

NRI Account Types, Eligibility & Benefits

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, pension, etc. Existing Resident Accounts can 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 exchange rate fluctuations.

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 foreign income in India. This type of acc. is ideal for NRIs wanting to remit earnings to India and maintain it in INR.	For managing income earned in India, like rent, interest, dividends, etc.	For holding foreign currency as fixed deposits in India. This type of account is ideal for non-residents aiming to avoid currency risk and earn returns in foreign currency	For holding foreign currency as fixed deposits in India. This type of account is ideal for non-residents aiming to avoid currency risk and earn returns in foreign currency
Currency Denomination	INR	INR	Select foreign currencies	Select foreign currencies
Affected by INR depreciation	Yes, because they are converted from foreign currency to INR.	Same as NRE accounts	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 to Income Tax (TDS)	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 a tenure equal to more than a year are available	Shorter tenure of less than a year is available	Fixed deposits with a tenure equal to more than a year are available	Shorter tenure of less 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 OCS, 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).

Compliance: You must ensure that they comply with the regulations set under the Foreign Exchange Management Act (FEMA) and other relevant regulations set by the government.

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?

To summarise our look into NRI Accounts: their types, features, benefits, and requirements, NRI accounts are a crucial tool non-residents use to maintain and manage their finances in India. The three 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. However, to maximise the utility these accounts offer, NRIs must stay current with the ever-changing regulations and norms set by regulatory authorities.

NRI Account Guide: Types, Features, Benefits & Eligibility