Banking
Bank accounts Banks offer two types of accounts to PROI / NRIs, based on whether funds available in the account are repatriable i.e. whether such funds can be transferred or repatriated abroad.
Repatriable accounts
(a) Non-Resident (External) Rupee Account Scheme (‘NRE’ Account)
NRE accounts are rupee denominated accountsCan be opened by NRIs and PIOs as savings, current, recurring or fixed deposit account.Both Principal and Interest can be repatriated / transferred out of India. Savings rate on NRE accounts is at par with savings rates in resident accounts.
Term deposits can be made for 1 to 3 years.
The interest rates on Non-Resident (External) Rupee (NRE) Depositsare deregulated. Accordingly, banks are free to determine their interest rates on both term deposits of maturity of one year and above under Non-Resident (External) Rupee (NRE) Deposit accounts.
(b) Foreign Currency (Non-Resident) Account (Banks) Scheme (‘FCNR (B)’ Account)
Deposits in FCNR (B) accounts can be made in freely convertible foreign currency —
Can be opened by NRIs and PIOs as term deposit account only —
Term deposits can be made for 1 to 5 years —
Similar to NRE accounts, in FCNR (B) Accounts both principal and interest are repatriable. —
Interest rate ceiling on FCNR (B) account prescribed by the RBI are on maturity period of 1 to less than 3 years it shall be LIBOR/SWAP plus 200 basis points and for maturity period 3 – 5 years it shall be LIBOR /SWAP plus 300 basis points. For floating rate deposits, the interest reset period shall be six months.
(c) (Non-Resident Ordinary Account Scheme (‘NRO’ Account)
NRO accounts are rupee denominated accounts
Can be opened by a PROI (individually or jointly with NRIs/ PIOs) or the purpose of putting through bona fide transactions denominated in Indian Rupees
Can be opened as savings, current, recurring or fixed deposit account
In NRO Account, only current incomes are repatriable. Savings NRO accounts are normally operated to credit rupee income from shares, interest, rent from property in India, etc.
The banks are allowed to determine their own interest rates on both savings and term deposit accounts
Banks can allow remittance up to USD 1 million per financial year for bona fide purposes from balances in the NRO accounts once taxes are paid out without any prior approval from Reserve Bank of India.
This limit includes the sale proceeds of immovable properties held by NRIs and PIOs. -
Resident Foreign Currency Account (‘RFC‘ Account)
Can be opened by a PRII (Person Resident in India) as savings, current or term deposit account
NRIs and PIOs returning to India can maintain an RFC account with an authorized bank in India to transfer funds from their NRE/ FCNR (B) accounts.
Proceeds of assets held outside India at the time of their return to India can be credited to the RFC account.
These funds are free from all restrictions as to their utilization or in investment in any form outside India.
Non-Repatriable accounts
Non-repatriable funds are those which cannot be taken out of India.
These have to be maintained in a separate bank account i.e. a Non Resident Ordinary (‘NRO’) account. Investments made from non-repatriable accounts cannot be repatriated but have to be maintained in a Non-Repatriable Demat account. Money once transferred from an NRE account to an NRO account cannot be transferred back to an NRE account.
Generally when a resident becomes a NRI, his existing savings account is designated as a NRO account. The NRO accounts could be maintained in the nature of current, saving, recurring or fixed deposits. NRIs can also open NRO accounts for depositing their funds from local transactions. The interest earned from NRO accounts is fully taxable in India. NRO accounts can be opened in the name of NRIs who have left India to take up employment or business temporarily or permanently in a foreign country.
Funds from NRO accounts are non repatriable / cannot be transferred to NRE accounts without the prior approval of RBI.
However, NRIs, PIOs, Foreign Nationals, retired employees or non-resident widows of Indian citizens can remit, through the Authorized Dealer, up to USD one million per calendar year from the NRO account or from income from sale of assets in India.
It may be noted that the RBI vide its circular dated 9th June 2011 has permitted foreign nationals to re-designate their resident account maintained in India as NRO account on leaving the country after their employment in order to enable them to receive their pending bonafide dues such as income tax refunds, Provident Fund withdrawals, etc. subject to certain conditions.
Remittance of salary A citizen of a foreign state resident in India, being an employee of a foreign entity and on deputation to India with the office/ branch/ subsidiary / joint venture/ group company in India of such foreign entity or being an employee of an Indian entity, may open, hold and maintain a foreign currency account with a bank outside India and receive/remit the whole salary payable to him/her for the services rendered, by credit to such account, provided that income tax chargeable under the ITA is paid on the entire salary as accrued in India.
Similarly a citizen of India, employed by a foreign entity outside India and on deputation to India, may open, hold and maintain a foreign currency account with a bank outside India and receive the whole salary payable to him/her for the services rendered in India, by credit to such account, provided that income tax chargeable under the ITA is paid on the entire salary as accrued in India.
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