Most NRIs though not physically residing in India but still have a lot of things to take care for here. It could be their dependent parents or relatives, property, business or investments. Banks like SBI, ICICI, HDFC, etc offer many services especially tailored for their NRI customers which enables them to take care of different situations in India and abroad. We discuss different banking services available to NRIs and how they can benefit from the same.
NRI Saving & Current Bank Account:
For any monetary transaction in India, all NRIs should have a bank account. As per FEMA regulations, NRIs cannot continue the normal saving account that they had while they were resident Indian.
There are two options:
- NRO Account (Non–Resident Ordinary)
- NRE Account (Non-Resident External)
The easiest way out is to convert the existing savings account to NRO account. This account is to park funds remitted from overseas to India or funds from Indian sources and hence can be used to manage existing mutual fund investments, pension credit, rent, bill or EMI payments, etc.
Additionally, NRIs can also open NRE account. NRE account is also rupee-based account to park funds remitted from overseas to India. The advantage is they are freely repatriable which means both principal and interest earned can easily be transferred from NRE account to foreign currency without any restriction.
Both NRE & NRO accounts can be either Savings, Current Account or Fixed Deposit.
NRE VS NRO Account:
The table below shows the difference between NRO & NRE account:
|Particulars||NRE (Non-Resident External)||NRO (Non–Resident Ordinary)|
|Who can Open Account?||NRIs/PIOs/OCIs||Any person resident outside India|
|When can one open Account?||After becoming NRI||While leaving India (even before becoming NRI)|
|Deposit Allowed||Only overseas income in foreign currency||Income originating in India and overseas income|
|Joint Account||In the names of two or more NRIs. With a resident close relative on ‘former or survivor basis’||In the names of two or more NRIs or Resident Indian|
|Repatriation||Freely repatriable||Repatriated up to USD 1 Million in a financial Year with some restictions|
|Transfer-ability of Funds||NRE to other NRE & NRO accounts||NRO to NRO account only. NRO to NRE accounts requires documentation.|
|Tax on Interest||No Tax in India||Taxable as per Income Tax Slab|
|TDS on Interest||No TDS||TDS @ 30.9%|
FD for NRIs:
Other than the Saving or current account, Banks like SBI, ICICI, etc offer Fixed Deposit for NRIs. The FDs for NRIs can be of 3 types:
- NRO FD
- NRE FD
- FCNR(B) FD
We take a look at each type of NRI FD schemes:
NRO FD is similar to normal bank FDs available to resident Indians. The deposit tenure can be from one week to 10 years and the interest rates are generally same as normal bank FDs. The interest received on this deposit is taxable as per applicable income tax rates. NRIs can take advantage of Double Tax Avoidance Agreement (DTAA) to reduce their tax burden.
Of Interest: Best NRO Fixed Deposit Interest Rates
In case of NRE FD the tenure of deposit varies from 1 year to 10 years. The biggest advantage is the interest received is tax free in India.
Also Read: Best NRE Fixed Deposit Interest Rates
FCNR (B) or foreign currency non-resident (Bank) are fixed deposit account where NRIs can make deposit in foreign currency remitted from income abroad. The maturity and payback too are in same foreign currency. FCNR (B) are denominated in a variety of currencies:
- US Dollar
- British pound
- Canadian dollar
- Japanese yen
- Australian Dollar
- Singapore Dollar
- Hong Kong Dollar
The tenure of deposit can be from 1 to 5 years. Like NRE account, the interest received in FCNR(B) account is tax free in India. The advantage of FCNR account is it eliminates currency risk.
All big banks like SBI, ICICI, etc also offer loans like home loan, personal loan, car loan etc to NRIs. The conditions and documentation process could be slightly different from bank to bank and type of loan availed.
For SBI home loan NRI will be an Applicant (Borrower), with a Resident Indian as a Guarantor whereas in case of ICICI Bank Personal loan for NRIs, Applicant to be a resident Indian and the co-applicant NRI to be a close relative. NRIs can also get Car Loan, Loans against NRI Deposits, Online Overdraft against NRI Deposit, Loan Against Securities such as Shares, Mutual Funds(equity, Debt, FMPs), US64 Bonds, Insurance Policies, NSC, KVP, etc.
Almost all banks in India have a dedicated team and some banks like SBI have dedicated branches in India and abroad to service NRIs. The NRE and FCNR(B) deposits are something worth exploring for NRIs as the interest received is tax free in India. Also the interest rates offered by banks here on US, Singapore and Hong Kong Dollar are higher than offered by banks in respective countries. The bank loans for NRIs are also good option especially when creating asset in India.