NRI: Meaning and types of NRI accounts

What is the Full Form of NRI?
 

The full form of NRI is Non-Resident Indian. An NRI is an Indian citizen who resides outside India for work, education, or other purposes. NRIs have specific banking and investment needs due to their income being in foreign currencies like the US dollar or Euro. NRI accounts, available at major Indian banks, help manage these needs by allowing NRIs to hold and convert their earnings into Indian rupees. These accounts offer various features such as currency denomination, transferability, and tax benefits. Non-Resident Indians (NRIs) can open three types of accounts in India: NRE Account, NRO Account, and FCNR (B) Account.

What is an NRI account?
 

We have already discussed what NRI stands for. Let’s take a comprehensive look at what is an NRI account. Non-Resident Indians (NRIs) can open three types of accounts in India: NRE Account, NRO Account, and FCNR (B) Account.

As per the Income Tax Act, 1961, an NRI is classified as follows:

A person is a non-resident Indian if he/she does not meet the residency criteria as below:

• You have been in India for 182 days or more during the previous Financial Year; or
• You were in India for a period of 60* days or more during the previous Financial Year and 365 days or more during the four years immediately preceding the previous Financial Year.

*The period of 60 days is substituted by:

• 182 days if he/she is an Indian citizen leaving India for the purpose of employment or as a member of the crew of the Indian ship.
• 182 days if he/she is an Indian citizen or Person of Indian Origin (PIO)/Overseas Citizen of India (OCI) residing abroad and coming on a visit to India but having income less than ₹15 lakh from Indian sources.
• 120 days if he/she is an Indian citizen or PIO/OCI coming on visits to India but having income greater than ₹15 lakh from Indian sources.

If you fulfil any of the above conditions, you are regarded as a ‘resident’ of India for the previous year. In case you are unable to fulfil any of the above conditions, you will be regarded as a ‘non-resident’.

It is critical for NRIs to grasp the differences between the three bank accounts that are available to them in India. It makes it easier for them to meet their investing goals, their financial obligations, and make suitable plans for their residency.

Based on the NRI account they opt for, NRIs can open these accounts with earnings generated either in India or in their place of residence.

Eligibility criteria for opening an NRI account:
 

While the criteria for opening an NRI account might differ based on the bank, certain general criteria remain the same:

• Documentation:

Here are the documents required to sign up for an NRI account –

- NRI savings account application form

- Photocopies of different pages of their passport containing their details such as name, address, birth date, date of passport issuance and expiration, etc.

- Proof of employment

- Work permit, student visa, visa permit, employment visa, or resident visa

• Regulation (FEMA)

As per the regulations laid down by the Foreign Exchange Management Act, an individual is considered an NRI if they reside overseas (except Nepal or Bhutan) for more than 182 days in one financial year or have demonstrated with supported documents an intent to go abroad or reside outside India.  

Who should open an NRI account?
 

• NRIs: Non-Resident Indians who have a source of income in India can open an NRO account to park these funds. Those who have a foreign income can open NRE accounts.
• Persons of Indian Origin (PIO): PIOs are citizens of foreign countries who have valid Indian passports. They, too, can open an NRI account.
• Overseas Citizens of India (OCI): OCIs, too, are eligible to sign up for NRI accounts.
• Students studying abroad: Students studying in foreign universities can also open NRI accounts.
• Professionals working abroad: If you are a working professional in a foreign country, you can open an NRI savings account.

Types of NRI accounts
 

NRIs in India can open three types of accounts: NRE (Non-Resident External Account), NRO (Non-Resident Ordinary Account), and FCNR (Foreign Currency Non-Resident) bank accounts.

The key differences between the accounts are:

What is an NRE account?

The Non-Resident External or NRE Account makes it easier to transfer money generated overseas to India. It is a rupee-dominated account that's repatriable, meaning you may send your international earnings back to India. The interest you earn on the NRE account is tax exempt.

What is an NRO account?
 

With revenue received within India, a Non-Residential Ordinary or NRO Account can be formed and held in INR values in that deposit account. Rent, dividends, and other sources of income are all possibilities. There is no barrier to currency conversion in an NRO account because deposits are done in rupee denominations. However, funds in NRO account are taxable in India.

What is an FCNR (B) Account?

The FCNR (Foreign Currency Non-Residential Account) permits Non-Resident Indians or Persons of Indian Origin to make deposits in foreign currency. NRIs or POIs can make these payments in the denomination of their home country, and they must be held in any of the foreign currencies prescribed by RBI in that account.

Many NRI accounts exist and can be used for earning decent returns. In the article, we discussed what is an NRI Account, NRE meaning and much more. If you have any doubts regarding the accounts, head over to the IDFC FIRST Bank webpage, where you can find all the details you may require on the topic.

IDFC FIRST offers access to NRI savings account. It offers high exchange rates, monthly interest credits on NRE/NRO savings account, and access to a dedicated relationship manager. Click here to get started!