Bank Accounts for NRIs - Choose the One For You

Below are the significant features of the different types of bank accounats that can be opened by NRIs. NRIs can maintain the following three types of bank accounts in India:

RUPEE ACCOUNTS
1) Non-Resident (External) Rupee Accounts (NRE Accounts)
NRIs, PIOs, OCBs are eligible to open NRE Accounts. These are rupee denominated accounts. Accounts can be in the form of savings, current, recurring or fixed deposit accounts. They can be opened by remittance of funds in free foreign exchange. Foreign exchange brought in legally, repatriable incomes of the account holder, etc. can be credited to the account. Joint operation with other NRIs/PIOs is permitted. Power of attorney can be granted to residents for operation of accounts. The deposits can be used for all legitimate purposes. The balance in the account is freely repatriable.
Interest lying to the credit of NRE accounts is exempt from tax in the hands of the NRI.
Funds held in NRE accounts may be freely transferred to Foreign Currency Non Resident (FCNR) accounts of the same account holder. Likewise, funds held in FCNR accounts may be transferred to NRE accounts of the same account holders. Currently, the interest rate on NRE –SB (Savings Bank) A/c is 3.5% per year.
2) Ordinary Non-Resident Rupee Accounts (NRO Accounts)
These are Rupee denominated non-repatriable accounts and can be in the form of savings, current, recurring or fixed deposits. These accounts can be opened jointly with residents in India. When an Indian National/PIO resident in India leaves for taking up employment, etc. outside the country, his bank account in India gets designated as NRO account.
The deposits can be used to make all legitimate payments in rupees. Interest income, from NRO accounts is taxable. Interest income, net of taxes is repatriable. Authorised Dealers may allow the facility of repatriation of funds from NRO account for the specific purposes like children’s education, medical expenses, sale proceeds of properties, etc.

FOREIGN CURRENCY ACCOUNTS
3) Foreign Currency Non Resident (Banks) Accounts (FCNR (B) Accounts)
NRIs/PIOs/OCBs are permitted to open such accounts in US Dollars, Sterling Pounds, Japanese Yen and Euro. The account may be opened only in the form of term deposit for any of the three maturity periods viz; (a) one year and above but less than two years (ii) two years and above but less than three years and (iii) three years only.
Interest income is tax free in the hands of NRI until he maintains a non-resident status or a resident but not ordinarily resident status under the Indian tax laws.
FCNR (B) accounts can also be utilised for local disbursements including payment for exports from India, repatriation of funds abroad and for making investments in India, as per foreign investment guidelines.

Image: KalyanB