Non-Resident Indians (NRIs) are Indian citizens who live outside India for various reasons, such as employment, education, or business ventures. While NRIs may reside overseas, they often maintain financial ties with India. NRIs must use NRI bank accounts manage their finances effectively. NRI bank accounts are designed to cater to the unique needs of NRIs, offering features and benefits different from those of regular accounts used by Indian residents. This article will briefly define the concept of NRI bank accounts and explain the differences between their types.
What are NRI accounts?
NRIs can choose from three primary types of bank accounts:
NRE Accounts (Non-Resident External Accounts)
NRE accounts are denominated in Indian Rupees (INR) and are fully repatriable, which means customers can freely transfer funds in and out of India without any restrictions. These accounts are ideal for NRIs who want to park their foreign earnings in INR and earn tax-free interest on their deposits. With an NRE account at IDFC FIRST Bank, NRIs can enjoy the convenience of holding and managing their Indian income and investments without paying tax.
NRO Accounts (Non-Resident Ordinary Accounts)
NRO accounts are also denominated in INR but differ from NRE accounts in repatriability. While customers can repatriate funds from NRO accounts up to a limit per financial year, NRE accounts have certain restrictions. These accounts are suitable for managing income earned in India, such as rental income, dividends, or pension payments. The IDFC FIRST Bank mobile banking app offers NRIs a 24/7 access to their NRO accounts.
FCNR Accounts (Foreign Currency Non-Repatriable Accounts)
FCNR accounts allow NRIs to hold their foreign earnings in foreign currencies, eliminating the risk of currency fluctuations. The key benefit of FCNR accounts is that the principal and interest earned are fully repatriable, making them a popular choice for NRIs looking to safeguard their funds in a stable foreign currency. IDFC FIRST Bank’s FCNR accounts offer better returns than most overseas banks.
Differences between the types of NRI accounts
While all three types of NRI accounts cater to the financial requirements of NRIs, there are differences among them:
The most significant difference between NRE, NRO, and FCNR accounts is the degree of repatriability. NRE accounts allow full repatriation of funds without any restrictions, NRO accounts allow repatriation up to a certain limit, and FCNR accounts enable full repatriation of both principal and interest.
NRE and NRO accounts are denominated in INR, while FCNR accounts are held in foreign currencies, such as USD, GBP, EUR, etc.
Interest earned on NRE and FCNR accounts is tax-free in India, whereas interest earned on NRO accounts is subject to taxation.
Source of Funds
NRE accounts are funded with foreign earnings, while NRO accounts are funded with income earned in India. FCNR accounts are funded with foreign earnings held in foreign currencies.
NRE accounts are typically used for parking foreign earnings and investments, NRO accounts for managing Indian income, and FCNR accounts for maintaining foreign earnings in foreign currencies.
You must assess your own preferences before selecting an NRI account. These preferences include – the currency in which you wish to deposit your savings, whether you wish to repatriate money back home, and the source of your funds.