The last thing that you should be concerned about while living abroad is an NRI account. An act known as the Foreign Exchange Management Act, or FEMA, states mandatorily that an NRI (non-resident Indian) has to hold an NRI account in order to execute any financial transactions in India.
An NRI account is a bank account held in India by a non-resident Indian (an Indian living abroad). Non-resident Indians can make the use of NRI accounts to transfer foreign currency to India with a savings account. Furthermore, various NRI account types permit NRIs to save money earned in India or manage income earned from repatriation in India. There are, primarily, three types of NRI accounts in India, discussed in the sections that follow.
- A Non-resident External Account
This is also called an NRE account and one of the types of NRI account that gives you the facility of transferring foreign currency earned abroad into an Indian bank account. With this kind of non-residential account, an NRI can easily open an online demat account with a leading financial platform, like Motilal Oswal, and trade. You can transfer foreign currency to India, where it gets exchanged into INR, and conduct transactions. You can hold this kind of account as a savings bank account or even open a fixed deposit. You get key benefits like these:
- Funds that are credited into your NRE account from abroad are non-taxable in India, and interest from fixed deposits are not taxed in India either.
- It's easy and quick to transfer your funds back to your country of residence abroad.
- A Non-resident Ordinary Account
Also known as an NRO account, among the different types of NRI account uses, this account enables you to keep money that is earned in India, unlike an NRE account that holds funds earned overseas. You may have a savings account or a fixed deposit with this account type, and your sources of income may be in the form of rent from a property you own in India, dividends, etc. However, you should note that funds earned as interest from this account are liable to be taxed in India.
- A Foreign Currency Non-resident Account
An FCNR, as this is abbreviated, is a kind of NRI account in the form of a fixed deposit that is held by an NRI. However, this differs from the other two kinds of NRI accounts in that funds can be held in a fixed deposit in foreign currency denominations. Moreover, benefits include these funds being non-taxable (principal and interest amounts) and funds being unaffected by long-term currency fluctuations.
Concluding Notes
Whatever type of NRI account you choose must match your individual needs for saving and investment purposes. You can check out the Motilal Oswal online platform for any investment options you require.
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