NRI Account Benefits: 10 Exciting Benefits of NRI Accounts

Key Takeaways

There are multiple accounts available for NRIs and each account has its own set of benefits. Read on to know more!

Introduction

Do you live overseas but still maintain financial connections to India? Well, there may be many reasons behind it. You may have a house or property that you rent out, or perhaps you receive pension income that needs to be collected. Whatever the reason, managing your finances across borders can be a challenge.

For instance, simply receiving your rent or pension might require complex wire transfers and currency conversions, and you may even face tax implications on both sides of the border. Keeping your money safe and accessible can also be a concern.

Fortunately, NRI Accounts can make a significant difference. They offer a secure and convenient way to manage your finances in India from anywhere in the world. Let's explore NRI Account benefits and the ways in which they can simplify your financial life.

What is an NRI Account?

An NRI Account is a type of bank account specifically for Non-Resident Indians (NRIs), Persons of Indian Origin (PIOs), or Overseas Citizens of India (OCIs). These accounts are opened with banks or financial institutions (FIs) approved by the Reserve Bank of India (RBI) and offer banking services tailored to the needs of NRIs.

NRIs can use these accounts to deposit their income, which can come from sources within India or other countries. This income might come from their employment, investments, rental properties, pensions, or other sources.

NRIs have several banking options in India to meet their diverse financial needs.

There are three types of NRI Accounts:

Non-Resident External Account (NRE):

An NRE account allows NRIs to deposit their foreign earnings in India.

Key features:
- Denominated in Indian Rupees.
- Deposits must be from foreign earnings, not Indian income.
- Interest and principal are tax-free.
- Can be a current, savings, or deposit accounts.
- Can only be jointly operated with another NRI.
- Withdrawals can be made in the NRI's resident country currency, which may fluctuate.
- Funds can be transferred between NRE and NRO accounts.
Non-Resident Ordinary Account (NRO):

An NRO account is for managing income earned in India, such as rent, dividends, and interest.

Key features:
- Deposits can be in INR or foreign currency, but withdrawals are only in Indian Rupees.
- Interest earned is taxable.
- Can be savings or deposit accounts.
- Can be jointly operated with an Indian resident or another NRI.
Foreign Currency Non-Resident Account (FCNR):

An FCNR account holds deposits in foreign currencies (approved by RBI) for NRIs, PIOs, and OCIs.

Key features:
- Can hold deposits in any RBI-approved currency - USD, GBP, EUR, SGD, HKD, CAD, AUD, CHF, and JPY.
- Interest and principal are tax-free.
- These are term deposit accounts, so your money is locked in for a set time (usually 1-5 years).
- Can be operated jointly with a close Indian resident or another NRI.
- Interest rates depend on the tenure and currency of the deposit.
- The interest rate is fixed and does not change during the deposit term.

Open an NRI Savings Account

NRI Account Benefits

NRI Account benefits vary based on the type of account and the bank. However, here are some common advantages:

Global Financial Management:

One of the key NRI Account benefits is that they offer a global platform for managing your finances from anywhere in the world. They simplify international transactions and mitigate the intricacies of cross-border financial activities like paying bills and receiving rent or investment income.
Convenient Account Opening:

The documentation and process for opening an NRI Account is completely hassle-free, and you can open these accounts while living abroad, which adds to their convenience.

You only need a few documents to open your NRI Account:
- Valid passport copy
- Proof of Indian or overseas address
- Proof of NRI status (Employment Permit, Residence Visa, or Student Visa)
- PAN card copy or Form 60
- Proof of both overseas and Indian addresses
- Recent passport-sized coloured photograph
- Payment via cheque or DD drawn from your bank account
Tax Benefits:

Interest earned on NRE and FCNR accounts in India is exempt from taxes, allowing you to accrue interest on your deposits tax-free. This advantage significantly boosts your investment returns. On the other hand, interest earned on non-resident ordinary accounts is taxable. It's important to note that income from these accounts becomes taxable if the NRI does not have tax liabilities in another country.
Access to Indian Investments:

The RBI's Fully Accessible Route (FAR) allows NRIs to invest in market-linked assets, enabling them to participate in various Indian financial instruments like fixed deposits, mutual funds, stocks, and real estate.
High Returns:

NRI Accounts offer more attractive interest rates than regular domestic accounts, ensuring your money grows consistently. This creates a reliable passive income source. Interest earned in NRE, and foreign currency accounts is tax-free.
Smooth Fund Repatriation:

NRI Accounts allow for smooth fund transfers within India and internationally, offering convenience to NRIs who want to access their funds from abroad and within India. NRE and FCNR accounts are fully repatriable, meaning you can transfer both principal and interest to a foreign bank account without constraints. Meanwhile, funds in an NRO account can be repatriated up to USD 1 Million per financial year.
Joint Account Flexibility:

Another key NRI Account benefit is the option to open joint accounts. These joint accounts can be opened with a resident (Operating Instructions - Former or Survivor) or a non-resident (Operating Instructions - Either or Survivor) close family member by providing power of attorney. This flexibility lets NRIs manage their finances together with trusted family members, making account management more convenient and accessible.
Currency Conversion:

NRI Accounts provide the convenience of holding and conducting transactions in foreign currencies, eliminating the need for frequent currency conversions. This feature is particularly beneficial for NRIs managing foreign income or savings. These accounts support various foreign currencies, simplifying financial management for NRIs dealing with international transactions and offering an efficient solution for handling their diverse financial needs abroad.
Loan Facilities:

Authorised banks or financial institutions in India have the authority to approve loans to NRI Account holders or third parties, using the funds deposited in the NRI Account as security. Here, the term 'loan' includes all types of facilities, both fund-based (where actual money is lent) and non-fund-based (where guarantees or letters of credit are issued without actual lending of money).
Protection from Exchange Rate Fluctuations:

For NRIs earning income abroad, FCNR accounts offer a smart way to save. You can deposit your funds in your preferred foreign currency, eliminating the need to convert them to Indian Rupees. This protects your money from the ups and downs of exchange rates, so you can be confident your savings value remains stable.

Who Should Open an NRI Account?

NRI Accounts are designed for the global Indians. All Indians living and working overseas can benefit from having an NRI Account.

NRIs with dependents in India: Funds can be made accessible to family members in India. Many banks offer competitive rates on remittances to India.
NRIs who wish to participate in the stock market: NRI Accounts facilitate investments in the Indian stock and equity market.
NRIs who have income from the sale of assets in India: You can repatriate large amounts of money from the sale of property or investments in India back to your country of residence subject to the limits prescribed by RBI.
NRIs with local sources of income: An NRO account is ideal for those who have some form of earnings in India, even as they work abroad. They can use the account to remit these earnings abroad. Do note that any amount you deposit in an NRO account is subject to Income Tax in India and will require documentation.

Final Note

NRI Account benefits are linked to the type of NRI Account. For example, FCNR deposits allow you to hold your foreign earnings in foreign currency, protecting you from exchange rate fluctuations. NRO accounts are good for managing rupee earnings, while NRE accounts are ideal for remitting funds to India. You must understand these differences to choose the right account that best suits your financial needs and goals.

Interested in opening one or more of these NRI Accounts instantly? DBS Treasures offers 40+ lifestyle privileges with an NRI Account. Know more!

Frequently Asked Questions

What funds can be deposited in an NRO account?

Funds that can be deposited in an NRO account include:
- Income earned in India, such as rent, dividends, pensions, and income from farming or business.
- Sale proceeds of assets (like property or investments) in India.
- Transfers from NRE or other NRO accounts.
- Foreign currency remittances
- Interest from NRO savings and fixed deposits
- Other legal payments like insurance payouts and savings from earnings
Remember, money in an NRO account is taxed in India, and there are limits on how much can be sent abroad from this account, typically up to USD 1 million per financial year after fulfilling tax requirements.
Who cannot open an NRI Account?

An NRI cannot be opened by:
- Residents of India
- NRIs residing in Nepal or Bhutan (for NRO accounts only)
- OCI cardholders residing in India
- Foreign citizens with no Indian origin
- Foreign nationals who reside in India
- Minors without guardianship
What is the interest rate for the NRI Account?

The interest rate for NRI Accounts varies by bank and account type (NRE, NRO, FCNR), typically ranging from 3% to 6% per annum. Check with specific banks for current rates.