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NRI Bank Accounts – NRE / NRO / FCNR

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As NRI, you can open following different type of Bank accounts in India based on your requirements:

  1. NRO – Non-Resident Ordinary Account
  2. NRE – Non Resident External Account
  3. FCNR (Foreign Currency Non Resident)

NRE  Account vs NRO Account vs FCNR Account – Key Features

  NRE NRO FCNR
Type of Account Savings, Current, FD Savings, Current, FD FD
Held in Currency INR INR USD, GBP, EUR, AUD, CAD
Source of Funds Remittance from Overseas or Transfer from existing NRE/ FCNR Accounts Local Income in India (Rent, interest or dividend income).
Transfer from existing NRE

 

Remittance from Overseas or Transfer from existing NRE/ FCNR Accounts
Deposit of Rupee funds generated in India No Yes No
Repatriation Fully repatriable – both principal and Interest Restricted repatriability Recently RBI has allowed to transfer funds from NRO to NRE account upto maximum of $1 million in a financial year

 

Fully repatriable – both principal and Interest
Income tax Interest earned in NRE accounts is fully exempt from tax in India

 

Taxable in India. Tax will be deducted at source. Can file return & claim refund
Interest earned is fully exempt from tax in India
Joint accounts held with NRI NRI / Resident NRI
Key feature Rupee Account with repatriation benefits Account for depositing local funds Foreign currency deposits with full repatriation benefits and no exchange risk

 

Taxation for NRE , NRO . FCNR Account

Interest on the NRE account and FCNR account are tax free in India. However, countries like the US, which levy tax on global income of its residents and citizens will tax this income. So while interest on NRE and FCNR accounts are tax free in India, a US resident or citizen would have to add this interest to his total income in the US tax return and pay taxes thereon.

For NRIs in tax free zones like the Gulf region, the NRE and FCNR option would work best. For residents of the US, the choice would depend on the tax slab applicable in the US.

Interest on the NRO account is taxable and for NRIs, tax is deducted at source at 30%.

In case of a Double Taxation Avoidance Agreement (DTAA) between India and other countries, this TDS rate would be lower. For instance, the DTAA between India and the US lays down a TDS rate of 15% on interest from deposits in India.

These deposits may also be taxed in the country of your residence. The US, for instance, taxes global income of its residents and citizens. However, if tax has been deducted at source in India, the investor will get a credit in the US for taxes paid in India.

You can always file returns in India and claim refund if your Income is below taxable limit in India.

Summary

NRE Account – Suitable for NRI who wants to transfer foreign earnings into INR and enjoy full repatriability & tax free interest income.

NRO Account – Suitable for NRI who has Income in India (Rent, Pension etc)

FCNR Account – suitable for NRI who wants to keep their money in foreign currency.

You can open multiple accounts to suit your needs.

If you have any queries related to this article or any other personal finance query ( Investment, Taxation etc), please comment below

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The author is a Chartered Accountant and loves to write about Personal Finance, Wealth Management, Taxation etc. Disclaimer - The articles on this website is for informational and knowledge purposes and should not be treated as financial advice, Please consult your financial advisor before taking any investment decision.

26 comments

  1. Vishal Pendharkar

    Hi,
    I currently have ICICI NRE account and I observed that every fund transfer I make from the account to other bank accounts, I have to pay NEFT charges.
    Also for cash withdrawals there are charges after first withdrawal. I find these charges exorbitant and add up a substantial amount, as I have to do 8-10 fund transfers every month.

    Is there any comparison of NRE accounts with different banks out there?

    Thanks,
    Vishal

    • Hi Vishal,

      Nortmally Banks levy NEFT charge if the transfer is done in Brnach and no charge if done online. I have Kotak NRE and they donot charge NEFT when transferred online.

      Not sure about cash withdrawal, as not withdrawn cash reently from NRE. However, there should not be any cash withdrawl charge from ICICI ATM and in base branch.

    • Dear Vishal,

      We regret any inconvenience faced. Please write to care@icicibank.com with your contact details. Our official will assist you. Refer ‘150904’ in the subject line.

      Regards,
      ICICI Bank Customer Service Team

  2. Hi Vivek,

    I am a resident planning to migrate to Australia next month with my husband. I currently have 3 resident accounts here.
    1. HDFC savings account:
    a) I currently have an RD in HDFC maturing in the month of June. If i inform the bank and convert this account in NRO, will i have to incur the TDS of 30% at maturity. Or should i convert the account into NRO after June? What is the time frame within with we can convert existing resident accounts into NRE or NRO after migrating?
    b) Also, since all my other mutual funds, SIP and shares are linked to HDFC account i wanted to convert it to NRO. Please inform me if i am correct in doing so ?
    2. SBI savings account:
    a) I have a savings account in SBI which is linked to my PPF account in SBI. I want to continue with my PPF account. However, i am confused with the SBI savings account – I do not transact in this account. I had opened it just for the PPF account. But i believe if can net transfer funds from other NRE account to the PPF account, i can close the SBI savings account. Or since this is a nationalized bank, if i continue having the account, should i convert to NRE or NRO?
    3. AXIS bank salary account: I do not have any existing investments linked to this account. Hence, i wish to close this account after my final settlements. Or do you suggest converting this account to NRE as well?

    I wish to have an NRE account for FD’s, NRO for local investments, and also PIS account for market investments. Can you give me your valuable suggestions in this regards.

    • 1) You can convert the HDFC account to NRO in June as normally you have 6 months to convert. If you convert even after that bank donot impose it strictly.

      2) yes you can transfer money from other NRE Account to SBI PPF Account. it is better to keep that account as Resident or NRO as when the PPF is matured, the amount will be credited to this account.

      3)It doesnot matter much. You can either close the account and open new NRE Account. or you can convert this account into NRE .

      Your comment regarding maintaining different account for FD, local investment and market inv is correct.

  3. Hi Vivek,

    Me and my wife have a joint NRE account and Fixed deposits (NRE). We are currently based in UAE and are planning to return to India for good. What would be the tax implications for us – to minimise our tax implications when the account gets converted to resident account, should we have separate accounts to avoid clubbing our income on the interest on FD’s or can we file separate tax returns on the same joint account ? Would appreciate your inputs on this.

    • In case of resident FD, it is normally taxable in the hands of first holder.SO it may be better
      1) either you create the NRE FD separatelynow
      2) else when you come back to India, you close the NRE FD and then create resident FD in individual names.

  4. Hi Vivek,

    Thank you for your comments.
    As i am migrating to Sydney, Australia, i am planning to open an local Australian account in Commonwealth bank of Australia. Can you tell me currently which is the best bank to open account with in India. I believe opening an NRE, NRO and NRO-PIS account prefarably in one bank itself would be convenient. PLease suggest.

  5. Hello Vivek Ji,

    I am very confused and need your suggestion, please.

    Sir, I am a OCI card holder (citizenship another country) from last 5 years & living outside of India since last 10 years & also operate one normal Indian Rs saving bank account which I use time to time when I visit India.

    Sir,
    (1)Shall I continue to operate my normal saving bank account or should I close or convert to NRE/NRO a/c?

    (2) Also parents are frail to operate on their own so can I deposit their Indian Rupees into my account and if any tax implication.

    (2)Which a/c would be best & if I transfer my Indian rupee (3 lac ) into that will there be any any tax implication?

    Thank you very much for your time Sir.

    • Hi Vijaya,

      1) As per the rules,if you become non resident in India, then you should not held normal saving account. You need to inform the bank about change in residential status and submit request to convert the account to NRO or NRE.

      However, in practice, it is not followed or enforced very aggressively. As most NRI intend to return bank to India in future, they keep the normal saving account.

      2) Your parents can deposit money into your account and there is no tax involved in such transactions.

      3) There is no tax implication if you just transfer funds from one account to another.

      NRO account is for money to be credited from India.
      NRE account is for money to be credited from outside India.

  6. Thank you very much for your time and clarity.

    Kind regards
    Vijaya

  7. Hi,

    I was an NRI for 2 years and I have returned back to india now.. However as I was nt aware of the NRO/NRE reqt I had not converted my savings bank ac to NRO/NRE and had transacted regularly when I was there. I also had opened regular FD and so TDS of Rs5000 has been applied on the interest in the past FY. Should I file IT return and reclaim the same or just leave it as it is? I have also bought a house from my uncle making the payments in dollars to his daughter who lives in US.. Is there is a problem with this as well?

    • Hi Pradeep,

      Regarding FD interest, you can file return & claim the TDS refund. Now that you are back in India, there should not be much issue around not changing the Saving account initially.

      2) Re the Property purchase, could you give more details. Whether house is in India? How much money did you transfer to US. Is the property now registered in your name ?

  8. Hi Vivek,

    I am working in Gulf and my status is NRI. I plan to invest 1200000/- I do not have an NRE account. If i do an FD in an Indian bank with monthly return of 8.5%. If bank deducts 10% as tax can I claim that as I do not have any other income India. Opening an NRE account here is full of hassels and I will be back in India only after a year. Please suggest.

    Thanks!

    • Hi William,

      1) Open an NRE account is relatively easier in private sector banks like ICICI, Kotak, Yes Bank etc. You donot need to visit India.
      Your relationship manager will send you the form by email.
      You need to fill the forma and attach the passport & VISA copy & address proof.
      Scan it and send it back by email.
      The physical form & documents will be collected by Bank from your foreign country. they will ask DHL or other company to pickup.

      Please send me an email if you want reference of relationship manager of Kotak or Yes Bank.

      2) Regarding the FD made in India (in normal resident account), you can file the return online and claim the TDS refund.

  9. Hi Vivek,
    I have to move to Germany this February for work. So for the next financial year, I would be having NRI status. I have closed all my FDs etc. in the banks under the impression that I have to convert the account to NRO and then make the FDs again. Should I leave the accounts as resident accounts till end of March 2015 and then convert them to NRO or should I already ask for the conversion?
    I have a savings account in SBI which is linked to my PPF account. So I understand that this savings a/c has to be converted to NRO. Additionally I am thinking of creating an NRE account in SBI.
    Question is – can I deposit the money from my other resident savings a/c which is lying idle right now, into this NRE account (while opening it) and then make the FDs which are non-taxable?
    And what happens with the income earned in NRE account (through FDs) after I return to India?

    Regards,
    Shubhra

    • Hi Shubhra,

      Ideally you need to convert your saving account to NRO, but not many people follow this . Also banks are not enforcing it strictly for small customers.

      Money from Normal savings to NRE is not permitted. However, you can send money from NRO to NRE (see link below)
      http://wealth18.com/now-you-can-transfer-funds-from-nro-to-nre-account/
      But that also require some forms to be submitted.

      Even if you keep money in Normal FD accounts, your total Income in India will be below taxable limit. If any TDS is deducted, then you can always file return and claim refund.

      Regarding the second point on NRE FD Interest when returning to India – again you need to inform that bank that you have returns. At that time, the bank will either close the FD or convert it to the normal FD account that will make interest taxable.

  10. SHRI VIVEKJI
    IN NRO ACCOUNT ONLY INDIAN INCOME IS ALLOWED.
    IN NRE ONLY FOREIGN INCOME IS ALLOWED. INTEREST EARN ON CAPITAL IS TAX FREE.
    AS PER “KEY FEATURES” TABLE GIVEN ABOVE—- RBI IS RECENTLY ALLOWED TRANSFER FUNDS FROM NRE ACCOUNT TO NRO ACCOUNT.
    SHALL I TRANSFER MY PPF AMOUNT ON MATURITY FROM MY NRO ACCOUNT TO NRE ACCOUNT AND EARN TAX FREE INTEREST???
    SHALL I TRANSFER MY INDIAN INCOME FROM NRO ACCOUNT TO NRE ACCOUNT AND EARN TAX FREE INCOME.?

    IF YES IT IS OKY?
    BUT
    IF NO THAN HOW WE WILL KEPT SEPRATE INTREST EARN ON TRANSFER FROM NRO ACCCOUNT AND INTEREST EARN ON TRANSFER FROM FOREIGN INCOME– IN NRE ACCOUNT -FOR FILLING THE INCOME TAX RETURN.

    • Hi Nilesh,

      1) On Maturity, you can get your funds credited in NRO account. Later on, you can transfer funds from NRO to NRE account

      Then you can create NRE FD and earn interest tax free. There is no restriction on that.

  11. SIR ONE CORECTION
    THIRD LINE REDA — RBI ALLOWED FUND TRANSFER FROM NRO TO NRE{INSTEAD GF NRE TO NRO}

    • Hi Nilesh, Transferring NRO to NRO was always there. But now RBI has also allowed to transfer funds from NRO to NRE upto certain limit.

  12. Hi Vivek,

    Can one person have more than one NRE Accounts??

    Thanks.

  13. My wIfe & me are getting Immigrant Visa in JUNE 16. WE WILL Green card only after entering US port of entry. We will be going to US in Aug 16 & get green card. We both have our FDs in banks as Resident indians. We are within taxable limits now. Our source is interest income only. I find the following in the website of IT dept:
    An individual is resident if any of the following conditions are satisfied:
    i) he stayed in India for 182 days or more during the previous year, or
    (ii) he stayed in India for 365 days or more during the four preceding years and stays in India for atleast 60 days

    1. Can you please elaborate to me its implication to my above status?
    2. Can I convert to NRO after maturity of these FDs in Nov 2017: We come back in Nov 2017 to India.

    • Hi, I will need some more information from you:

      1) Are you currently living in India? Not sure how are you getting Green card?
      2) Are you going to US permanently or temporarily for visit.
      3) What is the reason for going to US? employment etc?

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