Every major bank in the country now offers online NRI accounts for its Indian customers settled abroad. These accounts can be accessed 24/7 from any corner of the world with options like internet and mobile banking.
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There are three different types of NRI accounts in Indian banks:
Non-Resident Ordinary Account (NRO)
NRIs can open an NRO bank account with the income earned from within India while he/she resides abroad. This might include income generated in the form of rent of a property owned by the NRI in India, dividends, pension, etc. This income can then be sent abroad through the NRO account.
The funds in this account are held in INR denominations. There is no need for a currency conversion before a deposit. The corpus and the interest earned on the NRO account are liable for Tax Deductible at Source.
Non-Resident External Account (NRE)
NRIs can open an NRE bank account with earnings generated from the individual’s resident country. The principal amount in the account, along with the interest generated, is fully transferable to India.
The funds in this account are held as INR, reducing the hassle of currency conversion. The entire balance in the NRE account is non-taxable in India.
Foreign Currency Non-Residential Account (FCNR)
NRIs who wish to deposit their incomes in the currency of their residence country can open an FCNR account. The currency should be allowed by the RBI.
Popular currencies like US Dollars (USD), Australian Dollar (AUD), Euro (EUR), and Canadian Dollar (CAD) are permissible. If the NRI earns income in some other currency, the deposits shall be converted to any one of the currencies on the list. The interest earned on the corpus in the FCNR account is non-taxable in India.
Key Differences Between NRE and NRO Accounts
The key points of difference between NRE and NRO accounts are:
Repatriation: In the case of an NRE account, repatriation is free for both the corpus and the interest. For an NRO account, the access is restricted. More than USD 1 million cannot be transferred in a financial year. The interest is free to repatriate, but repatriation of principal is only permissible under fixed limits. It also requires a sanction from a chartered accountant.
Tax: The operation of the NRE account is tax-free in India. When it comes to the NRO account, the interest is taxable under income tax. Wealth and gift tax is applicable under certain circumstances. (*Tax benefit is subject to changes in tax laws. Standard T&C apply.)
Account holders: Two parties can hold an NRE account jointly only if both are NRIs. An NRO account can be held between an NRI and an Indian Resident.
Fund transfer: Fund transfer is possible from an NRE account to another NRE account or an NRO account. An NRO account, on the other hand, allows fund transfer only to another NRO account.
Exchange rate fluctuations: While the NRE accounts can be subject to losses due to exchange rate fluctuations, such a risk is not involved with an NRO account.
How to Open NRI Account Online?
The process for opening an NRI account differs from bank to bank. Following is the standard procedure irrespective of the financial institution:
Visit the web portal of the desired bank.
Find the ‘NRI Banking’ option and click on the ‘Open NRI account’ option.
Choose amongst the available account type as per your financial requirement.
Fill in the relevant details in the form. These include personal details and details about your employment and other overseas matters.
Upload supporting documents.
Once approved, the bank will ask you to make an initial payment to make the account functional.
Who is Eligible to Open an NRI Account?
The basic criteria for opening an NRI account is as follows:
The individual should be employed or own a business in a foreign country.
The individual should be a student studying in a foreign country.
The individual should be a government employee on a diplomatic passport.
The individual should be employed in an organization that requires him/her to be outside Indian territories for at least 182 days. Examples include airlines registered under a foreign nation, oil rigs, etc.
Who Should Consider Opening an NRI Account?
If you fall under any of the following categories, then you can consider opening an NRI account in India:
NRIs who have dependents in India
NRIs who plan to return to India in the future
NRIs engaged in trading in the Indian Stock Markets
NRIs with an income source in India
Documents Required to Open an Online NRI Account
You have to submit the following documents for opening an online NRI account:
Passport copy
Residence proof of overseas address
Work Permit, Student Visa, Residence Permit to prove the NRI status
Overseas bank or credit card statements.
Copy of PAN card
Supporting documents like Aadhar Card, passport size photographs
Embassy, notary, or a banker can attest identity, address, and NRI status proof
Benefits of an Online NRI Account
You can enjoy the following benefits from your online NRI account:
Investment opportunities: Probably the most important benefit of an online NRI account is that it allows the investor to invest in the stock market and various investment plans. This is possible through Portfolio Investment Scheme (PIS) or NRI Portfolio Investment.
Ease of transfer: Smooth transfer of funds is possible with the NRO and NRE accounts. It is easy to transfer the corpus as well as the interest. Transfer from NRO account to NRE, however, is possible only after paying the required taxes.
Good returns: Investors who open NRE or FCNR accounts see high returns on total deposits.
No risk of exchange rate fluctuations: In the case of an FCNR account, the funds are deposited without conversion to INR. This prevents the risk of exchange rate fluctuations.
Tax benefits: The entire balance in the NRE account is tax-exempt. In the case of the FCNR account, the interest is tax-free. (*Tax benefit is subject to changes in tax laws. Standard T&C apply.)
Loan: Some banks sanction loans to the account holder against the corpus accumulated in the account.
Convenience: The NRE and NRO accounts are very convenient to manage. Banks in India do not require NRIs to visit the branch. The entire process, from opening an account to transferring funds can be carried out online.
Disadvantages of an NRI Account
Like every coin has two sides, an NRI account also has some disadvantages along with benefits. These include:
Account-holders are at risk of losses due to an increase in home currency value or a decrease in the value of the foreign currency. This mainly occurs during repatriation.
Those who wish to refrain from losses due to exchange rate fluctuations can opt for FCNR investment. It has the option of only a fixed deposit, which has a maturity period of 1 to 5 years. Some banks also charge a penalty for premature withdrawal.
The NRE account needs a monthly balance of Rs. 50,000 to Rs. 1 lac, depending upon the bank norms.
In Conclusion
Online NRI accounts are the best banking opportunity for the NRI investor looking to manage his/her funds back home. The investor has the liberty to pick between the types of accounts based on specific financial needs and the services offered.
It is necessary to evaluate different criteria to understand which is the best choice for the investor.
FAQ's
Q. Who is classified as an NRI?
A. Individuals who spend more than 120 days a year outside India are known as NRIs. The individual should have spent less than a year in the last 4 years and less than 4 years in the last 10 years in India to be classified as an NRI. He/she should have An individual who leaves India for employment or studies is classified as an NRI immediately.
Q. Can someone else operate my NRI account?
A. Yes. A person who holds Power of Attorney (POA) can operate your online NRI account on your behalf, subject to limited access and local payments. He/she cannot do the following:
Opening a new account or closing the existing account under the NRI’s name.
Repatriate funds.
Change address or contact details.
Transfer funds to accounts other than that of NRI’s.
Apply for loans
Withdraw fixed deposits.
Q. Can I open an NRI account with any currency?
A. Yes. The bank will, however, deposit the amount in INR.
Q. Can an NRI open bank accounts in different banks in India simultaneously?
A. Yes, there is no restriction on opening multiple bank accounts.
Q. Should all NRIs who hold a joint account be residing in the same country?
A. No. These holders may be residents of different countries.
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¶Long-term capital gains (LTCG) tax (12.5%) is exempted on annual premiums up to 2.5 lacs. **Returns are based on past 10 years' fund performance data (Fund Data Source: Value Research).
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