If you have recently moved overseas from India and wondering should you open an NRI account or not then you should read this article. Do I receive questions like why should I open an NRI account? Is it mandatory for NRI to open NRE or NRO account? and much more on similar lines. I'll try to answer some of these questions in this article. First of all, it's not mandatory for an NRI to open NRI bank accounts in India, but it is mandatory to convert your resident bank account to NRO account according to FEMA law.
If you don't have a resident savings account, which is quite rare in today's internet banking world, then you don't need to inform your bank about your residential status, but you have to specify that when you pay income tax. Again if you have no income in India, you don't need to pay any tax but many NRI does have income in India, hence, they are required to pay taxes as well.
1) Required By Law, NRI can only open NRI accounts In India
If an NRI wants to open a bank account in India it must be an NRI account e.g. it could be NRE, NRO, FCNR, or RFC account. An NRI cannot open a resident saving account or current account.
If you don't have a resident savings account, which is quite rare in today's internet banking world, then you don't need to inform your bank about your residential status, but you have to specify that when you pay income tax. Again if you have no income in India, you don't need to pay any tax but many NRI does have income in India, hence, they are required to pay taxes as well.
4 Reasons to Open NRI Accounts for Overseas Indian
Now, let's see some of the important reasons to open NRI accounts1) Required By Law, NRI can only open NRI accounts In India
If an NRI wants to open a bank account in India it must be an NRI account e.g. it could be NRE, NRO, FCNR, or RFC account. An NRI cannot open a resident saving account or current account.
If you already have a saving account with any public or private sector bank or even with a bank run by co-operative societies, you need to inform them about your residential status so that your resident account can be converted to an NRO account.
According to FEMA, It's mandatory for any NRI to convert his resident account to NRO. Alternatively, you can also close your resident account if you don't need an NRO account e.g. you don't have any income in India.
2) For Investment purpose
NRIs have a unique saving instrument called NRE fixed deposit. Unlike resident and NRO fixed deposit, interest earned on NRE fixed deposit is tax-free in India, which makes it a favorite fixed income investment among the NRI community. You earn the interest you see and no TDS is deducted on interest earned by NRE FDs.
2) For Investment purpose
NRIs have a unique saving instrument called NRE fixed deposit. Unlike resident and NRO fixed deposit, interest earned on NRE fixed deposit is tax-free in India, which makes it a favorite fixed income investment among the NRI community. You earn the interest you see and no TDS is deducted on interest earned by NRE FDs.
Since the interest rate offered by Indian banks is also at par with resident fixed deposit and USD touching close to 70 INR, investing money on NRE fixed deposit is very popular among NRI communities.
3) To keep money in Indian Rupees
Many NRIs have expenditure in Indian rupees e.g. they have to support their parents or some other expenditure for which they need Indian rupees. You need an NRI account to hold your money in Indian rupees or INR. You can open NRE or NRO account depending upon your need as described in this article.
4) To deposit Indian income
Many NRIs have real estate investments in India. Many of them hold multiple flats on metros like Mumbai, Chennai, Bangalore, Pune, etc which earn them rental income. You need an NRO account to save that rental income. Similarly, any other income which is earned in India needs to go to this NRO account e.g. royalty, service charges, etc.
These were some of the common reasons to open an NRI account. As I said, it's not mandatory for an NRI to open an NRI account but you need it sooner or later. One thing is clear you cannot hold your resident saving account, you either need to convert it into an NRO account or you need to close it. NRI can only open NRI accounts which are NRE (Non-Resident Externa), NRO (Non-Resident Ordinary), FCNR, and RFC, choose the one which suits your need.
3) To keep money in Indian Rupees
Many NRIs have expenditure in Indian rupees e.g. they have to support their parents or some other expenditure for which they need Indian rupees. You need an NRI account to hold your money in Indian rupees or INR. You can open NRE or NRO account depending upon your need as described in this article.
4) To deposit Indian income
Many NRIs have real estate investments in India. Many of them hold multiple flats on metros like Mumbai, Chennai, Bangalore, Pune, etc which earn them rental income. You need an NRO account to save that rental income. Similarly, any other income which is earned in India needs to go to this NRO account e.g. royalty, service charges, etc.
These were some of the common reasons to open an NRI account. As I said, it's not mandatory for an NRI to open an NRI account but you need it sooner or later. One thing is clear you cannot hold your resident saving account, you either need to convert it into an NRO account or you need to close it. NRI can only open NRI accounts which are NRE (Non-Resident Externa), NRO (Non-Resident Ordinary), FCNR, and RFC, choose the one which suits your need.
Other NRI Banking Articles you may like
- NRE, NRO, or FCNR? Which is the right account for NRIs?
- Difference between NRE and NRI Account?
- Is NRO Account Taxable in India?
- How to appoint a mandate holder in NRE Account?
- What happens to the NRE account when you return to India?
- Is it mandatory to open NRI accounts?
- Can you break FCNR Fixed deposit before maturity?
- Can you repatriate money from the NRO account overseas?
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Now I am clear and understood the actual reason of opening the NRI account. Indians living abroad has four reasons to open the NRI bank account. Blog readers may also read the International NRI Banking.
ReplyDeleteThanks for the article. Very helpful!
ReplyDeleteHi there,
ReplyDeleteGovt has made it mandatory to declare aadhar number linking to bank accounts in India by 31st Dec 2017.
I hold resident indian bank accounts. If I convert these accounts to NRI accounts (as I'm eligible as NRI now), will this not be mandatory for my NRI accounts later ?
Thanks.
Hello @Anonymous, Yes, it is mandatory to link Aadhaar number to your bank account but that only applicable for resident saving account. Since, NRIs are not eligible for Aadhaar, there is no such provision for them.
DeleteThe solution is to covert your resident saving account to NRO account, those are exempted from this linking. Atleast, until government allows NRIs to get Aadhaar. Also, you cannot keep normal saving account once you become NRI, you must convert them to NRO account or close them.
Is there any specific amount as balance to be maintained for NRI and NRO accounts?
ReplyDeleteI need to convert my Axis bank account to NRO, does NRO account have interest paid as normal saving account? Can I convert it on line, or by requesting to bank over phone or email? I don;t want to travel to India just for this reason.
It will be good to add some official site where this is mentioned -
ReplyDelete"it's not mandatory for an NRI to open NRI bank accounts in India, but it is mandatory to convert your resident bank account to NRO account according to FEMA law."
Yup will find and add. Thanks
Deletewhat if i am on work visa and want to apply a loan. i can go back to India any time... is it mandatory in that case too.
ReplyDeleteHi,
ReplyDeleteI'm staying in the UK this financial year and will continue to live here for more than 6-7 months and will go back to India after that. I'm working for an Indian company and on an Indian payroll.
1) Is it mandatory for me to convert all Indian Saving accounts into NRO ? It looks like quite a hassle because once I go back to India, I'll again have to get normal saving, salary and other accounts opened ?
2) If I convert Savings into NRO account - can I convert those back into normal savings account once I reach India back ?
Thanks
HI,i have a saving account in India and there is some commission income i am receiving in that account.and i am NRI now so what will be the best option to do?can i convert my saving account to NRO account and send NRI income to same account ? or i keep that saving account as it is and open a new NRI account with same bank ???
ReplyDeleteHello @Unknown,
Delete1. Convert saving to NRO Account
2. Open New NRE account and use it as much as possible.
Hi,
ReplyDeleteThanks for the blog
I moved to Ireland recently (1 month back) and i have 1 joint account and 2 SB accounts in India by reading this blog i came to understand that we need to convert SB to NRO (After 6 months) its fine.Now my question is can we use the same debit cards which we have now for withdrawals and online transactions when i am in India and also do we need to maintain minimum balance?
Yes, mostly nothing changes except your account status. Though, just inform your bank and they can guide you better. They can also open NRE account for you.
DeleteI am working in South east Asia for the last 9 months and may be working for another 12-18 months. My payroll is not in India, however I have Homeloan that I am paying in India and have my bank accounts in India and investment in Mutual funds and equity. So what is the advise, do I need a NRO/NRI account
ReplyDelete