NRIs have to always deal with a million dollar question about money transactions. Who should be trusted? Who should be made accountable?
A lot of agencies including Government agencies provide multiple options to choose for financial transactions. The decision to choose the bank account primarily revolves around whether the money is to be transacted in Indian Rupee or foreign currency.
The Accounts Dealing in India Rupee
1. Non Resident Ordinary Account (NRO). This account can be maintained as Savings, Current or Term Deposit account. Joint account is possible. The funds cannot be sent back outside India except for interest earned on those funds. Interest on funds in this account is taxable. Funds can be used for payments in India in Rupee. The transactions are governed by FEMA rules of Govt of India.
2. Non Resident External Account (NRE). This account can also be maintained as Savings, Current or Fixed Deposit account. The funds in this account can be used outside India freely. The interest on funds is exempted from income tax. Accounts are opened strictly under RBI guidelines. The inflow in this account is only in foreign currencies.
The Account Dealing in Foreign Currency
1. Foreign Currency Non Resident Account (FCNR). The account can be operated in six currencies, i.e. US Dollar, UK Pounds, Japanese Yen, Euro, Canadian Dollar and Australian Dollar. This account can be opened as Term Deposit account. Interest on these funds is credited on maturity in the same currency.
Loans can be availed against funds in FCNR accounts to a maximum limit of 75% of the total funds in the account. The transactions have to be in Rupee and the funds can be used for all purposes except investment.
Interest earned from FCNR account is tax-free. And the funds in this account can be used within India or abroad in any currency format.
A variety of account options; basically variations of accounts mentioned above; are provided by various banks. The exact interest rates, eligibility and applicable rules can be studied from respective bank websites.
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- Indian Bank Accounts for an NRI
- Fixed Deposit Options in India
- COMMONLY USED NRI TERMS
- NRI INVESTMENTS SOME FAQ’s
- The Safety of Online Banking Is In Your Own Hands
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