Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs) are not allowed to operate a regular bank account after their residential status changes from a resident Indian to an NRI or OCI. The Foreign Exchange Management Act (FEMA) mandates that an NRI or OCI must maintain an NRI account if they wish to conduct financial transactions in India. However, before applying for an NRI account, it is important for NRIs to know about different NRI bank account types. Depending on their requirements and source of income, you can apply for a suitable bank account for hassle-free transactions.
SBNRI is a business partner of leading Indian banks. An NRI can apply for an NRE/ NRO account with one of these Banks by clicking the button below.
NRI Bank Account Types
Basically, there are two types of NRI bank accounts – NRE and NRO bank accounts. As far as fixed deposit accounts are concerned, there are three types of NRI FD accounts – NRE, NRO and FCNR fixed deposit accounts. Let’s understand them in detail!
NRE Savings Account/ Fixed Deposit Account
Non-Resident External or NRE savings accounts and fixed deposit accounts allow NRIs/ OCIs to save and manage their foreign earnings in a bank in India. Foreign currency funds deposited in an NRE account are converted into INR at the prevailing foreign exchange rate. Thereafter, NRIs can maintain and withdraw funds in INR. NRIs can compare different features like interest rate, NRI account minimum balance requirements, etc. of different banks to find the best NRE account.
Some of the key benefits of having an NRE savings/ fixed deposit account are as follows:
- Hassle-free financial transactions: It is a convenient way to maintain your savings from income that you earn outside India and carry out hassle-free financial transactions in India.
- Tax benefits: Both principal amount and interest earned in an NRE savings and FD account are not taxable in India.
- Repatriation benefits: There are no restrictions on the repatriation of funds in the NRE account back to your country of residence. Account holders can freely transfer funds from their NRE savings account back to their country of residence.
- Joint account holding: You can hold an NRE account with another NRI or resident Indian (who is a close relative as per Companies Act 2013). In case of resident Indian, the mode of operation will be on ‘former or survivor’ basis.
NRO Savings Account/ Fixed Deposit Account
An Non-Resident Ordinary or NRO account is also a rupee-denominated savings and fixed deposit account. NRIs can open an NRO account for managing the income they earn in India, such as salary, dividends, rental income, etc. NRIs can also deposit foreign currency in an NRO account.
However, interest earned on the amount in an NRO savings/ fixed deposit account is liable for tax deductible at source (TDS) in India as per the Income Tax Act of India. NRIs can repatriate up to USD 1 million during a financial year from their NRO account. You can check and compare features offered by several banks to pick up the best NRO account as per your requirements.
You can enjoy the following benefits by opening an NRO account:
- Hassle-free fund management: An NRO account can be ideal for managing your India earnings and expenses. It is the only account that allows NRIs to deposit the income they earn in India, such as rent, dividends, pension, etc.
- Joint account holding: You can open a joint NRO account with other NRIs or a resident Indian. But, in case of a resident Indian, the mode of operation will be on former or survivor basis.
FCNR Fixed Deposit Account
Foreign Currency Non-Resident or FCNR account is a fixed deposit account that NRIs can open to transfer the income they earn abroad in the same foreign currency. In terms of underlying currency denomination, an FCNR account is different from NRE and NRO fixed deposit accounts. Indian banks accept deposits in several currencies, including US Dollar, Euro, Great Britain Pound, Australian Dollar, Canadian Dollar, Singaporean Dollar, Japanese Yen, Hong Kong Dollar, and Swiss Franc.
Here some of the key benefits of FCNR fixed deposit account:
- Repatriation benefits: The principal amount and the interest in an FCNR account are fully and freely repatriable i.e. can be transferred from Indian to a bank account abroad.
- Low risk: Since FCNR fixed deposit is maintained in foreign currencies, it is one of the best investment options for NRIs looking to retain their income in a foreign currency for higher returns. This ultimately reduces the risk of losses due to currency fluctuations.
- Tax-free investment: Neither the principal amount deposited nor interest earned thereon is taxable in India.
Difference between the NRI Accounts
Here are the differences between NRI bank accounts:
| Particulars | NRE Account | NRO Account |
|---|---|---|
| Currency accepted | Only foreign currencies can be deposited in an NRE account. | Foreign currencies and Indian Rupee (INR). |
| Currency denomination of deposits | Indian Rupee | Indian Rupee |
| Purpose of account opening | Suitable for NRIs to deposit the income they earn abroad in INR. | Suitable to deposit the income NRIs earn in India. |
| Types of account | Savings, current, recurring and fixed deposit accounts. | Savings, current, recurring and fixed deposit accounts. |
| Taxability | Both principal and interest earned is tax-free in India. | Interest earned is subject to taxation in India. |
| Joint account facility | Can be opened with another NRI or resident India (on former or survivor basis). | Can be opened with another NRI and resident Indian. |
| Effect of exchange rate | Affected by the prevailing foreign exchange rates. | Not affected by the exchange rate. |
| Repatriation of balances | The entire balance is fully repatriable. | You can repatriate up to $ 1 million each financial year from your NRO account. |
How to open NRI account online
You can apply for NRI account opening online by clicking the ‘Apply for NRI Button’ in this article or through SBNRI app. Take the following steps to open an NRI account on the SBNRI app online:
- Download the SBNRI app from the Google Play Store or App Store.
- Sign in using your credentials.
- Click the ‘Open NRI account’ button and select the bank with which you wish to open an NRI bank account from the bank list.
- Scan and upload KYC documents using the in-app scanning feature.
- Click on ‘Apply’ and you are done.
Due to lots of information and documentation required to apply for NRI accounts, NRI account opening process is lengthy and cumbersome elsewhere but you can download SBNRI App to apply for an NRI account with nominal documentation in just 10 minutes.
You can also click on the button below to open an NRI account. Also visit our blog and Youtube Channel for more details.
