If you are currently planning for immigrating to a foreign land from India, an NRI account is the most crucial thing that you may need. Similarly, people who have already started living abroad must also transform their standard bank accounts to NRI accounts mandatorily. Several nationalized and private banks in India can provide you with an opportunity to open NRI accounts. They also allow you to transform the standard savings accounts to NRI accounts.
If you are at stress to choose the right NRI account due to the lack of proper technical knowledge, consider going through the facts mentioned here in details. You can know about the three main variants of NRI accounts and the unique conveniences they can deliver you.
The Non-Resident Ordinary Accounts
The Non-Resident Ordinary (NRO) accounts are the simplest type of NRI account available in the market. If you are leaving the country soon, it is better to transform your standard savings account to the NRO account.
The main work you need to do is to inform your bank about your immigration along with the essential documents justifying it. An Indian passport and the visa can be the most useful documents that you can produce.
All incomes related to the NRO accounts are taxable, and you can keep a joint holder of the account who will get all the banking facilities. TDS and other taxes are also deducted according to the current slab by the government.
All deposits in your NRO account will be in INR. You also get a chance to deposit foreign currency denominations in the Indian currency in your NRO account while you visit India temporarily. The joint holder can also deposit money in your NRO account in INR. All local payments within the country can be done from a single NRO account.
The funds of another NRO account can be anytime transformed a newly formed NRO account if the name of the holder is the same. However, there is a restriction on fund transfer from the NRE accounts to NRO accounts.
All NRO accounts delivered to the NRIs from the reputed banks allows the holder to repatriate a decent amount up to 1 million USD in a year. The tax deduction is, however, made according to the Indian income tax laws.
If an NRO account holder comes back to the country and continues to live here, The NRO account is transformed into a regular savings account once the holder informs the bank.
An FCNR account can be the best for NRIs who desire to keep an account exclusively for foreign currency. This account allows the holder to keep a decent sum of foreign money like Yen, Pound, USD, Canadian Dollar and Euro.
The most significant benefit that an FCNR account holder can enjoy is that of the complete tax relaxation on the interest. Maturity periods ranging from 1 to 5 years is applicable for the FCNR accounts. Repatriation of the principal is restricted in FCNR account. However, the holder can fully repatriate the interest.
The banks expect the FCNR account holders to continue their NRI status. In the case of this account, income tax on the interest is only levied if the NRI citizen returns to India for staying. Multiple monetary conveniences are there for the FCNR account holders. Money in the FCNR account can be used for local payments as well as the export-related payments of India. Nevertheless, these payments can only be done according to the thorough guideline of Foreign Investment Laws of India. Moreover, you must have clear knowledge of exports to invest on it.
Non-Resident External Account
In terms of the basic features, the Non-Resident External (NRE) account is drastically similar to the NRO account. However, the main benefit lies in the case of taxes. The NRE accounts are entirely tax-free. No TDS or income tax is deducted on the principal or the interest of the money in the NRE account. The other difference that NRE account possesses concerning NRO is regarding the fund transfer. An NRE account holder can easily transfer money to both NRE and NRO account.
NRI accounts are lucid to manage. Furthermore, you can get the necessary guidelines from the banking executives. Make sure you keep a close connection with your bank regarding the total period of your immigration and return to the country.
The primary responsibility as an NRI account holder that you must dedicatedly maintain is enhancing its transparency. Reluctant and unplanned usage of the NRI accounts can lead you to face legal trails. There are chances for you to face hefty penalties and even legal punishments. Moreover, you can face specific problems related to staying in a foreign land.
It is always an excellent move to plan money and banking related problems early when you are sure of your immigration.