Do you wish to transfer money to India? Are you looking to invest in India? Do you have income in India that you wish to transfer out of the country? If yes, you need an NRI account with a bank in India. But which to choose – NRE or NRO or a deposit? Here is a primer to help you with this process.
A Non-Resident (External) Rupee Account (NRE Account)
Depending upon your need for interest returns, frequency of payments made using the account and liquidity; you can open NRE Current, Savings or Term Deposit accounts in India.
An NRE Account can be opened by transferring foreign currency funds to India. The best part is that money gifted to close relatives from this account is not subject to gift tax! This reduces the tax burden on the transfer of money to parents in India.
NRE accounts can be used for purchasing stock, buying property, making loan payments or other expenses. These accounts may also be used as security to raise loans. Money can be transferred out of the country at prevailing exchange rates. Interest earned on these accounts is tax free.
Ordinary Non-Resident Rupee Accounts (NRO Accounts)
Savings, Current or Term Deposit accounts which Indian residents have when they live in India acquire an NRO account status when they leave the country for employment. These accounts are ideal for people having a steady income from dividends, pensions, interest etc. One can also transfer funds to these accounts from abroad.
NRO accounts can be held jointly with residents of India and the funds can be put to similar use as with NRE accounts. But the interest earned on deposits to NRO accounts is taxable.
Foreign Currency Non Resident Accounts (Banks) (FCNR Accounts)
These accounts hold money in a foreign currency. This eliminates losses arising due to exchange rate fluctuations. NRIs may open such accounts in US Dollars, Pounds Sterling, Deutsche Marks, Japanese Yen and Euros. These accounts are ideal for people who have to make payments in foreign currency: as an example, payment for exports out of the country can be made using FCNR accounts.
NRIs returning to India can open and operate Resident Foreign Currency (RFC) Fixed Deposit accounts from funds they hold in foreign currency.
Do you think these are one too many to choose from? Could these be rationalized to make things easier for NRIs? Where are the stumbling blocks? We would love to hear from you.
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