Settling abroad? Excited about relocating to a foreign country but worried about managing your financial affairs in the homeland? This is one issue that perplexes most Non-Resident Indians (NRIs). The solution is simple. Just update your existing bank accounts in India to those designated for NRIs, once your residential status changes.
You can choose between an NRE (Non-Resident External), an NRO (Non-Resident Ordinary) or an FCNR Account, based on your specific needs. These accounts have been created to simplify things for NRIs who wish to support their families, explore investment opportunities, or build up assets in India. Let's delve into the top benefits of opening NRI bank accounts in India.
NRIs with a Demat account can invest in the Indian stock market as well as other financial instruments through the RBI's Portfolio Investment Schemes (PIS). However, they cannot take part in intraday trading or short-selling. Also, it must be noted that shares brought through the NRE account and sold subsequently can be repatriated abroad but those routed via the NRO account cannot.
Repatriation of Funds
Any amount deposited in NRE and FCNR accounts is fully repatriable. Both principal and interest components can be moved from India to the NRIs present residing country without paying any taxes. However, there are some restrictions on the amount that can be repatriated from NRO accounts. Only balances of up to $1 million can be transferred in a financial year as per the Foreign Exchange Management (Remittance of Assets) Regulations, 2016.
Deposit Indian Earning: Many NRIs have local mediums that generate income. This could be in the form of rental property, interest, dividends, investments, pension, fixed deposits, and more. The bank accounts designated especially for global Indians can help manage their locally-sourced earnings effectively while they are based overseas.
NRE accounts are tax-free. In other words, the interest earned from NRE deposits such as savings account, FDs, recurring deposits, or any other investments, are not subject to taxation. The interest accrued in the NRO account, however, is taxable as per the income tax slab of the investor.
NRI bank accounts offer many more benefits. The money can be held in Indian denomination, which is a big plus for meeting expenses in the parent country. All major banks offer high-interest rates on NRE/FCNR fixed deposits. That's not all. Loans can be obtained against FDs associated with NRI accounts. Furthermore, deposits can be made any foreign currency, whereas withdrawals are allowed in INR. What's more, the accounts can be converted to the regular account once the NRI returns permanently to domestic shores. And yes, funds can be withdrawn from the NRE account using international debit cards. Last but not least, the minimum balance requirement for the maintenance of NRI bank accounts is a nominal Rs. 10,000.
As you can see, opening an NRI account is a viable option for Indian citizens living overseas as it offers them a host of benefits ranging from remittance of foreign earning to direct investment and tax exemptions, etc. The key is to understand your financial needs and choose the most suitable account.