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Indian Investment Guide - Bank Accounts By NRI

Non Residents India (NRI) /Person of Indian Origin (PIO) are permitted to open bank accounts in India out of funds remitted from abroad, foreign exchange brought in from abroad or out of funds legitimately due to them in India, with authorised dealer.

Such accounts can be opened with banks (authorized dealer) specially authorised by the Reserve Bank in its behalf.

Following types of accounts can be opened in India:

	Non-Resident (External) Rupee Accounts (NRE Accounts)
	Ordinary Non-Resident Rupee Accounts (NRO Accounts)
	Foreign Currency (Non –Resident) Accounts (Banks) (FCNR (B) Accounts)

Non-Resident (External) Rupee Accounts (NRE Accounts)

NRI &, PIOs, are eligible to open NRE Accounts. These are rupee denominated accounts. Accounts can be in the form of savings, current, recurring or fixed deposit accounts. Accounts can be opened by remittance of funds in free foreign exchange. Foreign exchange brought in legally, repatriable incomes of the account holder, etc. can be credited to the account. Joint operation with other NRIs/PIOs is permitted. Power of attorney can be granted to residents for operation of accounts.

The deposits can be used for all legitimate purposes. The balance in the account is freely repatriable. Interest lying to the credit of NRE accounts is exempt from tax in the hands of the NRI.

Funds held in NRE accounts may be freely transferred to FCNR accounts of the same account holder or another NRE accounts. Likewise, funds held in FCNR accounts may be transferred to NRE accounts of the same account holders.

Maturity period or operation of NRE account is decided by concerned bank discretion only. Loan facility is available up to Rs 20 lac to both in India or abroad to the account holder and as well as to the third party. Foreign Currency Loans (FCNs) facility is not available in this account. Nomination facility is available in this account.

Permissible Credits:-

1. Proceeds of remittances to India in freely convertible foreign currency in an approved manner from abroad.
2. Proceeds of foreign currency travellers cheques, drafts and personal cheques drawn by account holder on a foreign currency account maintained abroad by him (including instruments expressed in Indian rupees for which reimbursement will be received in foreign currency or in rupees from the account of a non-resident bank) deposited by account holder during his temporary visit to India, provided authorised dealer is satisfied that the account holder is still normally resident abroad, the travellers cheques/drafts are standing in the name of account holder and have not been endorsed in his favour and in the case of travellers cheques, they are discharged by the account holder in the presence of the bank officials.
3. Proceeds of foreign currency/bank notes tendered by account holder during his temporary visits to India, provided these are tendered to the authorised dealer in person by the account holder himself and the authorised dealer is satisfied that account holder is still normally resident outside India (Report on form A4 should be submitted).

Notes :

1. (Purchases of travellers cheques/ currency notes/bank notes made in terms of (b) and (c) above should be endorsed on the reverse of Currency Declaration Form (CDF), wherever applicable (See paragraph 3E.3). A photocopy of CDF should be kept on record by the authorised dealer.
2. Foreign currency notes/bank notes and travellers cheques tendered by the Power of Attorney holder or any person other than the account holder should not be credited to NRE account.
3. Rupee proceeds of foreign currencies/bank notes or travellers cheques tendered to a bank other than the one maintaining NRE account or to a money changer should not be credited to NRE account on the strength of encashment certificate issued by them.)
4. Transfers from other NRE accounts of same/other persons .
5. Interest accruing on the deposit account.
6. Interest on Government securities and dividend on Units of Unit Trust of India, provided the securities/units were purchased by debit to account holder's NRE account or FCNR account (Report on form A4 should be submitted).
7. Maturity proceeds of Government securities including National Plan/Savings Certificates as well as proceeds of Government securities sold on a recognised Stock Exchange in India and sale proceeds of Units received from Unit Trust of India, provided the securities/units were originally purchased by debit to account holder's NRE account or FCNR account or out of remittance received in free foreign exchange
8. Refund of share/debenture subscriptions to new issues of Indian companies or portion thereof if the amount of subscription was paid earlier from the same account or from another NRE/FCNR account of the account holder or by remittance from abroad through normal banking channels
9. Any other transaction if covered under general or special permission granted by Reserve Bank subject to compliance with conditions, if any, laid down by it
10. Refund of application/earnest money made by the house building agencies on account of non-allotment of flat(s)/plot(s), provided that the original payment was made by debit to the NRE/FCNR accounts of the concerned NRI or by direct remittance from abroad to the house building agencies and the authorised dealer is satisfied about the genuineness of the transaction with reference to the documentary evidence such as receipts issued by the house building agency and/or copy of agreement/sale deed/letter from the house building agency indicating non-allotment of flat/plot. Before allowing the credit of such refunds authorised dealers may call for inward remittance certificate evidencing receipt of funds from abroad by the agency concerned or a certificate from the concerned bank with whom the NRE/FCNR account is maintained to the effect that the payment of application/earnest money was made by debit to the FCNR/NRE account of the applicant. A declaration from the account holder to the effect that he continues to be a non-resident with his overseas address should be obtained. The net amount of Interest, (i.e. after payment of tax) if any, paid by the house building agency on the application/earnest money may also be credited to NRE/FCNR account. (Report on form A4 should be submitted).

Permissible Debits

1. Local disbursements;
2. Remittances abroad;
3. Transfer to NRE/FCNR accounts of the same account holder or any other person eligible to maintain such account.
4. Investment in shares/securities/commercial paper of Indian companies or for purchase of immovable property in India provided such investment is covered by general/special permission granted by Reserve Bank
5. Any other transaction if covered under general or special permission granted by Reserve Bank

Ordinary Non-Resident Rupee Accounts (NRO Accounts)

This is a Rupee denominated account and can be opened in the form of savings, current recurring or fixed deposits. These accounts can be opened jointly with residents in India. When an Indian National/PIO resident in India leaves for taking up employment, etc. outside the country, his bank account in India gets designated as NRO account.

The deposits can be used to make all legitimate payments in rupees. Interest income, from NRO accounts is taxable. Principal is not repatriable but current income and interest earning up to US $ 1 million per calendar year is repatriable out of the NRO balances/ sale proceeds of assets held in India. Interest income from NRO accounts is subject to income tax.

Power of attorney can be granted to residents for operation of accounts. Loan facility is available to both in India or abroad to the account holder and as well as to the third party. Foreign Currency Loans (FCNs) facility is not available in this account. Nomination facility is available in this account.

Permissible Credits:

1. Proceeds of remittances from outside India through normal Banking Channels received in foreign currency which is freely convertible.
2. Any foreign currency which is freely convertible tendered by the account holder during his temporary visit to India. Foreign currency exceeding USD 5000 or its equivalent in form of cash should be supported by Currency Declaration Form. Rupee funds should be supported by encashment Certificate, if they represent funds brought from outside India.
3. Transfer from rupee accounts of non-resident Banks.
4. Legitimate due in India of the account holder. This include current income like rent , dividend, pension, interest etc as also sale proceeds of assets including immovable property acquired out of rupee/foreign currency funds or by way of legacy/inheritance.

Permissible Debits

1. All local payments in rupee including payments for investment in India subject to compliance with the relevant regulation made by the RBI.
2. Remittance outside India of Current income like rent, dividend, pension interest etc. in India of the Account holder
3. Remittances upto USD One Million per financial year.

Foreign Currency (Non –Resident) Accounts (Banks) (FCNR (B) Accounts)

NRIs/PIOs are permitted to open such accounts in US Dollars, Great Britain Pound, Canadian Dollars, Japanese Yen and Euro. The account may be opened only in the form of term deposit for any of the five maturity periods viz;

1. One year and above but less than two years
2. Two years and above but less than three years
3. Three years and above but less than four years
4. Four years and above but less than five years
5. Five years only.

Interest income is tax free in the hands of NRI until he maintains a non-resident status or a resident but not ordinarily resident status under the Indian tax laws.

FCNR (B) accounts can also be utilized for local disbursements including payment for exports from India, repatriation of funds abroad and for making investments in India, as per foreign investment guidelines. Power of Attorney can be granted for permissible local payments or remittance to the a/c holder himself through normal banking channels.

Loan facility is available up to Rs 100 lac to both in India or abroad to the account holder and as well as to the third party. Nomination facility is available in this account.

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