How to Choose the Right Type of NRI Bank Account for Your Needs

Rahul was relocating to London for work and wanted to organise his finances before he left. He was looking for a suitable NRI account in India which would help him transact in his home country while he was away. That was when he learned of the different types of NRI bank accounts. He began his research to find out which one would best suit his needs.

When it comes to NRI banking, the Reserve Bank of India (RBI) stipulates that if the residency status of an individual changes, his savings account should be converted into an NRI bank account. However, NRIs can choose from the different types of NRI bank accounts which Indian banks offer. Choosing the right account is important so that the account can facilitate transactions in the currency of your choice.

Here’s a look at the types of NRI accounts in India and a guide to choosing the most suitable one.

• Non-Resident Ordinary (NRO) Account

An NRO account is one that allows you to manage the income earned in India, like interest income, rental income, etc. You can make deposits in Indian and foreign currency and open the account individually or jointly with a resident Indian or another NRI on former or survivor basis

You can open an NRO savings account or an NRO fixed deposit account. The balance in the account can be repatriated to your resident country after deducting the relevant taxes. The limit of repatriation is USD 1 million per financial year.

• Non-Resident External (NRE) Account

The NRE account allows you to deposit your foreign income in India. The account is denominated in Indian currency, and withdrawals are also done in INR. You can repatriate the account balance without limits, and the interest earned on the account is also tax-exempt in India.

• Foreign Currency Non-Resident (FCNR) Account

The FCNR account is essentially a fixed deposit account for NRIs. You can open the FCNR fixed deposit in multiple currencies like US Dollar, , Euro, Pound Sterling, Australian Dollar and Sindapore Dollar. The deposit is made in a foreign currency and also allows overdraft facilities. The interest earned is tax-exempt, and the account balance is freely repatriable.

Comparative analysis of NRO, NRE and FCNR accounts

How to choose the right account?

Each type of NRI bank account serves a specific purpose. As such, you should open an account based on your transactions and suitability. Here are some tips on how.

An NRO account is suitable if –

• You have investments or incomes in India, and you want a bank account for them
• You want to remit your foreign income to India that your family can withdraw in INR
• You want to transfer funds from one NRO account to another

An NRE account is suitable if –

• You want to manage your foreign income and deposit the same in India
• You want to earn tax benefits on your foreign income
• You want to remit money from abroad and also repatriate the account balance without any limit
• You want to transfer funds to a foreign account flexibly

The FCNR account is meant for NRIs who –

• Want to invest in a fixed deposit scheme in India in foreign currency
• Want to earn tax-exempt returns from their investments
• Want flexibility in repatriating the deposited amount and/or interest earned thereon

The bottom line

Assess the nature of your financial transactions in India and then choose from the most suitable types of NRI bank accounts that align with your needs. Understand the tax treatment of each account so that you can assess your tax liability and take steps to reduce it. IDFC FIRST Bank offers all types of NRI bank accounts in India, allowing you to choose the most suitable one. Open the account and make NRI banking a breeze.