If you are NRIs, Which Account would you Prefer to Open: NRE, NRO, FCNR or……

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Many of our NRI brethrens open their accounts in Indian Banks without knowing the fact, which type of account to open/maintain. Many fall prey into wrong hands and open accounts through Marketing Agencies, which for petty advantages misguide our NRI brethrens.

First of all, one should know that who the NRI is. Any Indian National, going abroad and remaining out of India continuously for 6 months and more is Non Resident Indian (NRI). The purpose of staying abroad may be for employment, education, business, change of residence or else.

An NRI can open following types of accounts in any Scheduled Commercial Bank in India:

NRE Account (Non Resident External Account):

Such account can be opened by any NRI in Indian Rupees (INR), for remitting funds from Abroad. This account can be opened by any individual NRI, singly or jointly with other NRI. NRI may add the name of Resident Indian in this account with the clause “Payable to Former or Survivor”. This means that till the NRI, in whose name account is opened is alive, has the right to operate the account and after his death the other joint holder has the right to operate the account.  The account thus opened may be Savings, Current or Fixed Deposit. The withdrawals from such account are allowed for making local payments. Interest earned on this type of account is exempted from income tax. A loan against this account is also allowed in INR. Funds in this account are fully repatriable to the country where NRI resides subject to exchange rates of the currency at the time of such transfer

NRO Account (Non Resident Ordinary Account):

Such account can be opened by any NRI in Indian Rupees (INR), for remitting funds from Abroad. This account can be opened by any individual NRI, singly or jointly with other NRI. NRI may add the name of Resident Indian in this account. The account thus opened may be Savings, Current or Fixed Deposit. The withdrawals from such account are allowed for making local payments. Interest earned on this type of account is not exempted from income tax. A loan against this account is also allowed in INR. Funds up-to One Million US dollars or equivalent can be repatriated to the country where the NRI resides subject to exchange rates of the currency at the time of transfer of funds.

FCNR Account (Non Resident Foreign Currency Account)

Such account can be opened by any NRI in Foreign Currency in US Dollars, Euros, Australian Dollars, British Pounds, Canadian Dollars, Japanese Yen etc. for remitting funds from Abroad. This account can be opened by any individual NRI, singly or jointly with other NRI. No Indian Resident is allowed to be a joint holder in this type of account.  The account thus opened may be Fixed Deposit for not less than one year and not more than three years. Interest earned on this type of account is exempted from income tax. A loan against this account is also allowed in INR or in Foreign Currency. Funds in this account are fully repatriable to the country where NRI resides. There is no exchange risk on this account as the account is maintained in the same currency.

RFC Account (Resident Foreign Currency Account):

This account can be opened by NRI, who come back to India for permanent settlement or may again go back. This type of account can be opened by individual singly or jointly with other NRI only. This account can only be a US Dollars, Euro or British Pounds. Principal and interest on this account remains in foreign currency only. Interest on this account is subject to tax in accordance with the status of the individual at the time of computation of tax. There is no loss due exchange fluctuation as long as this account remains in foreign currency only. This account can be converted to FCNR Account if the account holder regains the NRI status/goes back abroad.

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