Know About NRI Banking in India

Non-resident Indians (NRIs) cannot have a resident savings account with their name in India under the Foreign Exchange Management Act (FEMA). So, if they choose to settle abroad, they would need to close their resident savings account here or convert it into an NRO account. Continuing to use the accounts as is after moving abroad, may attract penalties.

However, after settling elsewhere, they can open an NRI account to park their earnings in India, should they decide to send the money earned in their respective countries of residence back home. There are three such NRI product propositions that NRIs can utilise for this purpose: Non-Resident External (NRE), Non-Resident Ordinary (NRO), and Foreign Currency Non-Resident (FCNR).

Listed below are the key account types under NRE and NRO Accounts

There are two advantages to having an NRI account. First, it provides a legal means for NRIs to save their foreign earnings in India. Second, it allows NRIs to legally retain any income earned in India.

Let us now learn more about some of the best NRI banking options in India.

Also read: https://www.idfcfirstbank.com/finfirst-blogs/savings-account/4-benefits-of-nri-account

Non-Resident External Account (NRE)
 

The NRE savings account is Indian rupee-denominated and designed specifically for NRIs. This NRI account enables an NRI to save their earnings in foreign currencies in India after the amount is converted into Indian rupees. The reverse is also true – funds in an NRE savings account, comprising both principal and interest, can be transferred to a foreign account freely, without complications or restrictions.

Also, one can use an international debit card to transact and withdraw money from an NRE savings account anytime and from anywhere in the world. In that respect, an NRE savings account can be a source of liquid funds. Needless to say, the NRE savings account provides total security to the repatriated funds. This account can be opened as a joint NRE savings account with another NRI or a close resident Indian relative on a former or survivor basis. It is essential that the funds deposited into the NRE savings account are earned in a foreign country.

Though the NRE savings account can be used for personal banking, NRIs are also known to primarily use it to carry out business in India and make investments in the country. Investing in mutual funds has become especially easier because of this NRE account. Here, all that the investing NRI needs to do is, link the NRE savings account number to the mutual fund account; the investment is effortless and instant.

Any amount deposited in the NRE savings account, and the interest earned thereon, are exempt from taxation.

Non-Resident Ordinary Account (NRO)

The NRO savings account has a lot in common with the NRE savings account, with a few fundamental differences.

The key difference between the two accounts is this: The NRO savings account is for depositing income earned in India as well as abroad; for the NRE savings account, only income earned outside India can be credited.

The second key difference is that repatriation from an NRO savings account is restricted and under the limit prescribed as per LRS guidelines, whereas funds from the NRE savings accounts are fully and freely repatriable.

The NRO savings account is also easy to manage, and account holders can even transfer up to $1 million from their NRE savings account in one financial year without any complications. However, any interest earned in the NRO savings account is subject to TDS (tax deducted at source).

Loans can be taken against NRE and NRO fixed deposits, and interestingly, the interest rates on such loans are usually lower than that for regular loans. The NRO savings account can be jointly held with a resident Indian on a former or survivor basis or an NRI. The account is ideal for retaining earnings in India in Indian rupees – rent, salary income, dividend, sale of property, etc.

Also read: https://www.idfcfirstbank.com/finfirst-blogs/finance/nri-investment-rules

Foreign Currency Non-Resident Account (FCNR)
 

There is also a third option for NRIs to park their funds: the Foreign Currency Non-Resident (FCNR) account.   It is a type of fixed deposit for NRIs in foreign currency.

This term deposit is also a stepping stone into investing in India for many NRIs. This is because any interest earned on the FCNR deposit is exempt from income tax, making the return higher and risk-free. 

What’s more, these term deposits can be withdrawn before maturity; there is no charge, though interest will not be paid unless a year has been completed. Also, the principal and the interest (plus any loan availed of, such as an overdraft) are repatriable.

Other major advantages of FCNR deposits are that they bring in some of the world’s key currencies, and exchange rate fluctuations are limited.

Fixed Deposits for NRIs

One of the best NRI banking options in India also includes fixed deposits..

· NRE FD

This NRI account enables investments or bank savings in Indian rupees and helps earn tax-free interest. The deposit tenure and interest rate may differ from domestic FDs. Deposits can be repatriated and are tax-exempt.

· NRO FD

It is an option for NRIs with income in India. Interest rates are at par with domestic FDs, and interest earnings are taxable.

· FCNR FD

As mentioned in the previous section, FCNR is a term deposit where NRIs can invest in foreign currencies.

· RFC FD
 

Resident Foreign Currency (RFC) is for NRIs who have returned to India; they can deposit their foreign currency in RFC accounts. Interest earned can be repatriated.

Also read: ​https://www.idfcfirstbank.com/finfirst-blogs/savings-account/nri-fixed-deposits-mistakes​​​

IDFC FIRST Bank: Your one-stop solution

For experiencing the best NRI banking in India, look no further than IDFC FIRST Bank; it offers NRE, NRO, FCNR options and more.

IDFC FIRST Bank's -

· NRE account allows 100% liquidity with tax-exempt returns on rupee-denominated savings

· NRO account is ideal for any income an NRI may have in India in terms of rent, dividends, and other investments

· FCNR deposit account offers better returns than overseas banks, plus, all interest earnings enjoy tax exemption

· NRE FD is a deposit for investments allowing deposits in foreign currencies with tax-exempt benefits for interest earnings. 

· NRO FD is a deposit option enabling parking of income earned in India; the account holder is assured of attractive IDFC interest rates

Also read: ​https://www.idfcfirstbank.com/finfirst-blogs/finance/comprehensive-guide-to-nri-investments-in-india​​​

Conclusion

The convergence of world leaders in India for the G20 summit shows the growing economic strength of India. For NRIs, the timing is perfect to invest in the country with multiple NRI account options. And for the best NRI banking services in India, IDFC FIRST Bank is always available with a helping hand. 

Disclaimer

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