Accounts for NRI


Updated February 27, 2014 ‚óŹ 458 views

A Non-Resident Indian quite often faces a situation of maintaining a Rupee account in India. The major reason to hold a banking account back in the home country is to repatriate the earned money back to the country. NRE and NRO are the two bank accounts available for NRI banking.

However let us see the benefits both the options that come with an NRI bank account.

Non Resident External (NRE) Account: It is a bank account that is initiated with the use of foreign currency i.e. foreign currency is deposited at the time of opening the account. This currency is usually presented in the form of notes or travellers checks.

Non Resident Ordinary (NRO) Account: This is a normal bank account that is opened by an Indian who plans to shift the base to a foreign country and becoming an NRI. The features are quite the same as an NRE account except for any repatriation done through this account should be done keeping RBI in loop by filling up the prescribed forms.

Let us now look into some of the similarities that the NRO and NRE account comes with.

  • Both the accounts can be opened as a saving, current, recurring or fixed deposit account.
  • All the transactions conducted in this account are in the Indian currency.
  • Nomination to both the accounts is accepted and can be opened jointly as well.
  • Both the accounts should maintain a minimum monthly balance of Rs 75,000.

These accounts however have their own set of differences that make them give one different benefits altogether. Let us look at the various parameters where these accounts do not coincide with each other.

Repatriation: The NRE account is freely repatriable with the principal and interest earned. On the other hand with the NRO account repatriability is restricted. USD 1 million net remittance is permitted with taxes applicable during a financial year; all this with a certificate from a chartered accountant.

Tax Treatment:  Wealth tax, income tax and gift tax aren’t incurred from the NRE account, it is completely tax free. When it comes to NRO account the earned interest and the credit balance are subject to the respective taxes implied. Wealth tax and gift tax is implied as well.

Joint Holding: Joint account policy for an NRE account is available however it has to be with another NRI and not with an individual residing in India. However the NRO account can be held by NRI as well as anybody residing in India, as per the law under Section 6 of the Companies Act 1956.

Deposit of Rupee Funds Generated in India: One can deposit money incurred from salary, dividends, rents etc. originated in India in a NRO account. However NRE account do not cater to any such services whatsoever.

Both the accounts come with their own set of benefits and disadvantages. However the primary reason to choose an NRE account should be to park your overseas money to India and convert it in the Indian currency. Whereas should go for a NRO account if wish to park the money earned in India.

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