Who is an NRI?
An Indian Citizen who stays abroad for employment/carrying on a business or vocation outside India, or stays abroad under circumstances indicating an intention for an uncertain duration of stay abroad is a non-resident. Non-resident foreign citizens of Indian Origin are treated on par with non- resident Indian citizen (NRIs).
Person can have Indian origin, if,
- He/she, at any time, held an Indian passport, or
- Parents or any of his grandparents hold Indian citizenship.
An NRI can make the following investments in India.
- Maintain bank accounts in India.
- Invest in securities/shares, and deposits with Indian firms/companies.
- Invest in immovable properties in India.
You must be familiar with terms like NRE account, NRO account, NRE account, NRO account, SBI NRI account, ICICI NRI Account, HDFC NRI Account. Yet, it is likely that you are still confused on how to invest money in India. This article explains the type of bank accounts available for NRIs.
Types of Non-Resident Bank Accounts
- Ordinary Non-Resident Accounts in Rupees [NRO]
- Non-Resident (External) Accounts in Rupees [NR(E)]
- Foreign Currency (Non-Resident) Account (Bank) Scheme [FCNR(B)]
- Non-Resident Non-Repatriable Rupee Account [NR(NR)]
Ordinary Non-Resident Accounts in Rupees [NRO]:
As the name suggests, it's an Ordinary Non-Resident Accounts in Rupees, also known as NRO account. The existing accounts of any Indian National can be designated as Ordinary Non-Resident Accounts, upon your NRI status, or these accounts can also be opened with initial deposits paid into any bank or post office (saving a/c) authorized to open Non-Resident accounts. NRO account can be of any type: saving, current or Fixed Deposit. Interest payable on NRO accounts is the same as on resident accounts. They vary from bank to bank as they have been freed from RBI regulation. You can also have a joint account with residents in India. NRO accounts may be re-designated as resident accounts when the account holder becomes a resident in India. Disadvantages of NRO:
- Interest earned on balances in NRO Accounts is not exempted from Indian Income tax. Instead income tax is deducted at source (TDS) i.e. at the time of payment of interest by the bank.
- Balance held in NRO account can neither be repatriated. No remittance in foreign currency is allowed without prior approval of Reserve Bank as well. So overall, the money stays 'as is' in India.
NRE Accounts NON-RESIDENT (EXTERNAL) ACCOUNTS:
The rates of interest on term deposit kept under NR(E) are generally higher than the rates of interest on NRO deposits. The following highlights some of the key features of NRE accounts.
- No income Tax.
- No joint account with an Indian residence.
- Non-Resident account holders can grant a power of attorney or such other authority to any residents in India for operating their NR(E) Accounts in India. Such authority is however, restricted to withdrawals for local payments. The attorney holder cannot repatriate funds held in accounts outside India under any circumstances or make payment of gifts on behalf of the account holder.
- The rates of interest payable on NR(E) accounts are subject to change from time to time as per directions issued from Reserve Bank of India.
An eligible Non-Resident Indian can open an account with any RBI approved authorized bank.
- The NRO account can't be converted into NRE. Also funds can't be transferred from NRO to NRE account without a special permission from RBI and proof of all existing funds required, which is a complex procedure than opening a new NRE account.
- The entire credit balance (inclusive of interest earned thereon) can be repatriated outside India at any time without any reference to Reserve Bank of India.
- Once you go back to India for good and become an Indian resident, NRE account can be converted into your normal Resident Rupee Account.
Disadvantages of NR(E) Accounts
NR(E) Accounts are opened in Indian rupees, and all foreign exchange remittances received for credit of that account are first converted to Indian rupees at the buying rates by the banks. The bank will permit any withdrawal in foreign currency, by converting Indian rupees in the account to foreign currency at the selling rate. All balances in the account are held in Indian rupees and are thus exposed to exchange fluctuation risk.
FOREIGN CURRENCY (NON-RESIDENT) ACCOUNTS -FCNR Account:
The deposit under FCNR (Banks) scheme is held in foreign currency. The interest and the repayment of the deposit is also made in the same foreign currency in which the account is maintained. The depositor may at his own will, obtain repayment in Indian rupees, converted at the buying rate on the date of repayment.
Deposits under this scheme are held for a minimum term of 1 year and maximum term of 5 years. Premature withdrawal is allowed, but there will be a penalty.
Non-Resident Account holders can grant power of attorney (for a specimen click here) or such other authority to residents in India for operating their FCNR(B) accounts in India. Interest rates are subject to the RBI guidelines.
FCNR Accounts can be maintained in U.S. Dollar, Pound Sterling, Japanese Yen and Deutshe Mark.
NON-RESIDENT, NON-REPATRIABLE RUPEE DEPOSIT SCHEME-NRNR: - Discontinued from April 1st 2002 by RBI
Accounts under the Non-Resident (Non-Repatriable) Rupee Deposit Scheme may be opened in Indian rupees, out of the funds in freely convertible foreign exchange transferred, for the purpose of India in an approved manner, from the country of residence of the prospective non-resident account holder, or from any other country. Transfer of funds from the existing NRE/ FCNR Accounts of the non-resident account holder may also open accounts. No penal interest is charged in case of premature withdrawal of existing NRE/ FCNR deposits for the purpose of making investment under the Scheme.
From 01.04.2002 Non Resident Indians are not permitted to open or renew NRNR deposits, as the scheme will cease to exist after 31.03.02. Premature closure of existing NRNR deposits for reinvestment in NRE/FCNR accounts is not permitted.
Can I retain my savings in foreign currency even after return to India?
Yes you can. This is usually after a continuous stay abroad for more than a year. You can also keep your foreign currency in Resident Foreign Currency (RFC) account in any nationalized bank in India. These funds can again be transferred to your NRI account, if you go abroad or become an NRI again.
Can NRI bring Gold to India?
NRIs can bring into India gold up to 1,000 grams, once in six months provided they have stayed abroad for a continuous period of six months. They are required to pay custom duty in at the latest rate according to EXIM Policy in any convertible foreign currency. They can pay per 10 grams of gold brought.
In what form can gold be brought by NRIs to India?
Any form including ornaments (excluding ornaments studded with stones and pearls).
I want to sell the gold/silver I take back. How should I do this?
Gold/silver brought by NRIs can be sold to residents for Indian rupees. According to the RBI rules, any person in India can buy gold/silver from the NRI by using a crossed cheque in India. Such money is credited to Ordinary Non-resident Rupee (NRO) account of the NRI gold/silver seller.
Can NRIs bring silver to India? Is there a maximum limit?
Yes. NRIs are allowed to bring upto 100 kgs of silver as part of personal luggage. This attracts import duty per kg. payable in foreign currency (U.S. dollars if going back from the U.S.)