As per a survey conducted by NriDealExpert.com, over 80% of us Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs) send money to India and more than 50% of them send money regularly for various reasons viz., to support their family back home, manage their expenses, savings, investments, etc. They spend a lot of time in researching the best money transfer to India option to maximize the rupees they get for their money (pounds, dollars, euros, dirhams, etc.) which could vary by the exchange rate, transfer fee, speed, special offers, transfer limit, mode of transfer and payment. But, most of them ignore another important factor – Type of bank account in India. Let’s understand it in detail.
A foreign resident including NRIs can transfer money to any bank account in India whether own or someone else’s (as long as the source of funds and reasons of sending money to India are legal). Most of the NRIs transfer money to their own bank accounts in India which is either a Non-Resident Ordinary Account (NRO Account), Non-Resident External Account (NRE Account) or a Resident bank account.
If you’re an Indian who has stayed outside India for 182 days or more during the preceding financial year, then your residency status in India changes to a Non-Resident Indian (NRI) and you lose your rights to maintain Indian bank accounts, investments, insurances or other financial products as Indian residents. As per FEMA regulations, when you become a Non-Resident Indian (NRI), you’re required to close your existing resident bank account in India or convert it to an NRO (Non-Resident Ordinary) account. However, still, close to 20% of us continue operating it as we may not be aware of the regulation. But, this is strictly illegal according to the law. So, once we have stayed outside India for 182 days or more during the preceding financial year then we can certainly not maintain the resident bank account India and transfer money to that account.
Now if you’re maintaining NRO and NRE accounts, you could benefit from sending money to your NRE account. Keep reading to understand it in detail.
Different types of Bank Accounts in India for NRI and OCIs
Lets first start with understanding the different types of Non-Resident Bank Accounts in India for NRIs and OCIs – Non-Resident Ordinary (NRO), Non-Resident External (NRE) and Foreign Currency Non-Resident (FCNR) Bank Account.
Non-Resident Ordinary Account (NRO Account) and Non-Resident External Account (NRE Account) can be a savings account or fixed deposit in Indian Rupees. You can deposit money into these accounts, by converting foreign currency into Indian Rupees (USD to INR, GBP to INR, AED to INR, CAD to INR, AUD to INR, etc) through a money transfer provider. There are many other similarities between both types of accounts viz.
- You will have a complete control of your money
- You can easily withdraw money in India
- You can get multi-city cheque book facility
- You can allow your family member or close relative in India to operate your account
- You can avail the benefits of internet banking
- You can pay your utility bills or shop online using the online banking option
However, there are few differences between the two:
- You can convert your resident bank account in India to an NRO account only but not an NRE account.
- You can deposit cash in Indian Rupees or allow local receipts (such as rent income, dividend, pension, etc) from other resident bank account or NRO account only into your NRO account but not an NRE account.
- Interest earnings from NRE accounts are tax-free in India, but interest earnings from NRIO accounts are taxed at 33.9% at source.
- You can transfer money from an NRO account to another NRO account or a resident bank account, but not to an NRE account. However, you can transfer money from an NRE account to another NRE account or NRO account.
- You can open a joint NRO account with your family member in India, but not an NRE.
- It's easier to repatriate funds from an NRE account without any documents and there is no limit on the repatriation amount as long as it is from your NRE account. However, the Government of India allows you to repatriate funds from your NRO account (NRO savings account or NRO fixed deposit) up to USD 1 million per financial year abroad. This also requires few documents like a certificate from a chartered accountant in India.
Foreign Currency Non-Repatriable (FCNR) account is very different to NRE or NRO accounts. This is a Fixed Deposit Foreign Currency account and not an Indian Rupee account. Deposits in this account can be made in any of the major currencies like US Dollar, UK Pound, Canadian Dollar, Deutsche Mark, Japanese Yen, and Euro.
NRE Account – The right account for sending money to India from overseas
We recommend our readers to maintain both NRE and NRO accounts in India – NRE account to transfer rupees to manage your payments in India (EMI for your home loan in India, property purchase, family maintenance, insurance, etc) and NRO account to deposit your earnings in India (such as rent income, dividend, pension, etc). Most of the banks add balances in both accounts for the computation of the minimum average balance required to be maintained in these accounts.
How can I open NRE or NRO bank accounts in India:
You need to complete and submit an application form to the bank you would like to open the NRO or NRE bank account with. Most banks facilitate completion of the form on their website or a download of the form. If not, then you can contact their call centre. Once you complete the form, you need to attach the following documents and send it to the address mentioned on the form. Few banks offer a free local collection or postage:
• Address proof of your foreign address
• Copy of your passport
• Copy of visa/work permit
• Your OCI or PIO card
• Your photographs
After receiving and verifying the application and documents, your bank will open the NRO and NRE bank accounts. So, don’t wait further to open an NRE account in India if you don’t have one already. Compare here to find the best bank to open your NRE savings account or NRO savings accounts in India.
We hope you found this information useful. Please do share it with your friends and family if you think they will too.
Disclaimer: Please note that it is our endeavor to provide unbiased and accurate information but cannot guarantee it to be perfect, so please do your bit of research and use the information from this article at your own risk.