FAQs about NRI- Non Resident Indian Accounts

Who is an NRI? 

There are two definitions of an NRI:

·         A NRI definition under Foreign Exchange Management Act -FEMA is given as “Person Residing outside India is the term used for an NRI, being a person who has gone out of India or who stays outside India for the purpose of employment or carrying on business or vocation outside India or any other circumstances which indicate his intention to stay outside India for an uncertain period.” NRI permanently settled and residing outside India will continue to be treated as an NRI under FEMA irrespective of the number of days of his stay in India or otherwise. This definition is applicable for all matters concerning all his bank accounts and investments in movable and immovable properties in India.

·       As per IT Act, 1961, an NRI is any individual who during any Financial Year doesn’t stay in India for more than 181 days. The stay does not need to be continuous and it should include day of arrival and departure.             

What are the different types of accounts maintained by NRIs?

The three basic types of accounts of NRIs are as follows:

·      NRO – Non Resident – (Ordinary) Account

a.      A Non Resident (Ordinary) Account can be opened and maintained by any person residing outside India i.e. an NRI or a foreigner.

b.      The accounts are not convertible / non repatriable and are maintained in Indian Rupees in the form of savings, current, recurring or fixed deposit accounts. It can be repatriated only after permission from RBI.

c.      The interest rates are charged at tax rate of 30.90%

·   NRE - Non Resident- (External) Account

a.    NRE Account refers to funds deposited with a bank or any other institution that allows for the efficient conversion and transfer of Indian and foreign currency both within and outside of India.

b.    An NRE Account allows transfer in foreign currency, and the amount in this type of account can be freely repatriated to India. Also, the account holder can easily send funds out of India.

c.    The interest earned on this savings is exempt from tax.

·   Foreign Currency Non Resident (FCNR)

a.    These accounts are usually deposits denominated in foreign currency. The same can be opened and continued by a Non-Resident Indian who may be an Indian citizen or a Foreign citizen of Indian Origin residing outside India.

b.    The accounts are convertible and are maintained in foreign currency in the form of fixed deposits.

Going forward, we would discuss the investment allowable by NRIs in our future blogs. For understanding more about these bank accounts you can contact us at saarthifp@gmail.com

Please note - we have shared the definitions from the RBI and FEMA webpage