NRI Account: Meaning, Types, Eligibility, and Benefits

Open an NRE Savings Account

Indians residing abroad often need to manage their finances across different countries. For those preparing to move overseas, understanding how to maintain financial connections with India becomes essential. In this context, an NRI Account is particularly significant. Beyond simply a banking service, NRI Accounts act as a vital link for millions of Indians abroad, integrating their global income with their financial commitments in India.

NRIs can open these accounts using their earnings, whether sourced from within India or their country of residence, depending on the type of NRI account.

is an NRI Account?

An NRI Account is a type of account that Non-Resident Indians (NRIs), Persons of Indian Origin (PIOs), or Overseas Citizens of India (OCIs) can open with a bank or financial institution authorized by the Reserve Bank of India. These accounts offer various banking services tailored to NRIs. The term "NRI Account" stands for Non-Resident Indian Account, which can be set up with banks or other authorized financial institutions.

NRIs can use NRI Accounts to deposit their income, which may come from India or any other country. This income could be from employment, investments, or other sources.

The three types of accounts that Non-Resident Indians (NRIs) can open are the NRE Account, NRO Account, and FCNR Account.

Types of NRI Accounts

As previously discussed, NRIs in India can choose from three types of accounts: the NRE Account (Non-Resident External), the NRO Account (Non-Resident Ordinary), and the FCNR Account (Foreign Currency Non-Resident). Below are the key differences between these account types:

1. NRE Account

An NRE Account allows NRIs to deposit income earned abroad while maintaining the account in Indian rupees. For example, Mr. Ajay works in Italy, while his dependent mother lives in Delhi. Each month, he sends €2000 to his NRE Account for his mother’s expenses, which are deposited in Indian rupees. Assuming the exchange rate at the time is 1 EUR = 80 INR, his remittance of €2000 would be credited as ₹1,60,000 to his NRE Account.

2. NRO Account

An NRO Account is used to deposit income earned within India and is maintained in Indian rupees. This income might come from sources like rent or dividends. For example, Mr. Raj, an NRI living in New York, owns an apartment in Chennai, which he has rented out to Mr. Dikshant. To receive the rental income, Raj must open an NRO account where Dikshant can deposit the rent payments regularly. Since the NRO account is in Indian rupees, there is no need for currency conversion when making deposits.

3. FCNR Account

The FCNR Account is designed for Non-Resident Indians (NRIs) or Persons of Indian Origin (PIOs) who wish to hold deposits in the currency of their country of residence. Deposits in an FCNR Account are held in any one of the foreign currencies specified by the Reserve Bank of India.

Eligible currencies for FCNR deposits include U.S. Dollars (USD), Canadian Dollars (CAD), Australian Dollars (AUD), Euros (EUR), British Pounds (GBP), Singapore Dollars (SGD), Hong Kong Dollars (HKD), Japanese Yen (JPY), and Swiss Francs (CHF). For example, if an individual earns in one of these currencies, they can deposit funds directly into the FCNR Account without currency conversion. However, earnings in other currencies would first be converted into one of the approved currencies before deposit.

Eligibility Criteria

The NRE/NRO Savings Account can be opened by individuals who meet the following eligibility criteria:

• Non-Resident Indian (NRI)
• Indian citizens living abroad for employment, education, or business purposes.
• Individuals working for a UN Organization or on assignment abroad for the Government of India or public sector undertakings.
• Indian nationals in the merchant navy, individuals who are working on oil rigs, and those who are employed with airlines overseas.
• Persons of Indian Origin (PIO) / Overseas Citizens of India (OCI)
• Anyone who has held an Indian passport at any time
• Individuals whose parents or grandparents were citizens of India as per the Constitution of India or the Indian Citizenship Act, 1955.
• Spouses of Indian citizens or PIOs

Open an NRE Savings Account

Documents Required

For NRI (Non-Resident Indian)

• A copy of a valid passport (including pages displaying your name, address, date of birth, issue and expiry dates, place of issue, photograph, address, signature, and any immigration stamps or visa pages, if applicable)
• Proof of NRI status, such as a valid employment or residence visa copy, or work/residence permit
• Proof of both Overseas and Indian addresses (in line with Customer Identification Policy)
• A copy of an Indian PAN card or a completed Form 60
• A recent passport-sized color photograph
• For seafarers specifically: a current work contract, a copy of the CDC (Continuous Discharge Certificate) along with the last page showing the disembarkation stamp, and a FEMA declaration to verify NRI status

For PIO (Person of Indian Origin)

• A copy of a valid passport (including pages that show your name, address, date of birth, issue and expiry dates, photograph, signature, and any observation page)
• A copy of a valid PIO/OCI card or any other documentation verifying PIO status (in accordance with Customer Identification Policy)
• Evidence of both overseas and Indian addresses (as per Customer Identification Policy)
• A completed and signed PIO declaration
• A copy of the Indian PAN card or Form 60
• A recent passport-sized color photograph

Advantages of an NRI Account

1. Enables Investment in Financial Instruments

A key advantage of NRI accounts is that they allow individuals to engage in stock market trading and various investment schemes. These investments are made possible through the Portfolio Investment Scheme (PIS) or NRI Portfolio Investment provided by financial institutions. This RBI scheme permits NRIs to trade in market-linked financial instruments, including equity shares and debt instruments like company debentures, via their NRI accounts.

2. Tax Advantages

Holders of NRE and FCNR accounts can benefit from tax-exempt interest on their deposits, in accordance with the Income Tax Act of 1961. However, these global earnings may be subject to taxation in India based on the individual's domicile or residency status, particularly if the NRI is not liable for taxes in any other country, as outlined in the Union Budget 2020 proposal.

3. Attractive Returns

NRIs who deposit their funds in fixed deposit accounts, such as NRE FDs or FCNR accounts, can benefit from significant returns on their total deposits with minimal risk, as these accounts are not influenced by stock market volatility. The interest rate on NRE accounts can be as high as 3.5% per annum on savings held within the account.

4. Protection Against Exchange Rate Fluctuations

Depositing foreign earnings directly into an FCNR account allows individuals to avoid converting these funds into INR. This option helps NRIs protect their deposits from fluctuations in exchange rates, thus maintaining the value of their funds.

Other benefits

• Both the principal and the interest earned are fully repatriable without restrictions.
• Easily and securely transfer funds globally through the internet and mobile banking services.
• A joint NRE account can be established with another Non-Resident Indian (NRI) or Person of Indian Origin (PIO), allowing operation on either or survivor basis.
• NRE accounts can be utilized for investments in various mutual funds within India.
• The principal amount and interest earned are exempt from taxes in India.

Who Should Open an NRI Account?

NRI Accounts cater to a diverse group of individuals with different financial requirements and objectives. Here’s a brief overview of who may benefit from opening an NRI Account:

Professionals Abroad:

Individuals employed outside India who need to remit money to their families or maintain savings in India.

Students Overseas:

Those studying internationally who require a simple method for managing finances between their host country and India.

Investors:

NRIs looking to invest in Indian equities, bonds, or real estate, needing a platform to facilitate their investments.

Returning NRIs:

Individuals who have amassed wealth abroad and plan to return to India, wanting to repatriate their savings.

Family Support:

For those with financial obligations or responsibilities towards family members in India, as an NRI Account offers an effective means to manage such expenses.

Also Read: -

Eligibility Criteria for Opening an NRI Account

Conclusion

NRI accounts in India provide a range of benefits tailored to meet specific financial needs and objectives. They offer tax advantages, various investment options, seamless fund repatriation, and competitive interest rates, making them a complete financial solution. The ability to open joint accounts, designate beneficiaries, and utilize online banking services enhances the utility of NRI accounts for effective financial management. However, choosing the right banking institution is crucial to maximizing the benefits associated with an NRI account.

DBS Bank offers Growth Plus NRE/NRO Savings Accounts and Growth Max NRE/NRO Savings Accounts, each with varying sets of lucrative advantages. You can click through the links to get a detailed understanding of the features/benefits of these accounts and choose the best option for yourself.

Would you like to avail preferential rates on remittances to India? With DBS Treasures, you can have access to better rates and faster international money transfers. Know more!

*This article is for information purpose only and is not a tax advice by DBS Bank. Sound professional advice should be taken before making any investment decisions. Bank will not be responsible for any tax loss/other loss suffered by a person actng on the above.

Open an NRE Savings Account