Summary: Non Resident Indian (NRI) account is a bank account held by an individual who is a resident of India but is living outside of the country. Know types of NRI account.
20 Sep 2021 by Team FinFIRST
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What is the Full Form of NRI?
The full form of NRI is Non-Resident Indian. An NRI is an Indian citizen who resides outside India for work, education, or other purposes. NRIs have specific banking and investment needs due to their income being in foreign currencies like the US dollar or Euro. NRI accounts, available at major Indian banks, help manage these needs by allowing NRIs to hold and convert their earnings into Indian rupees. These accounts offer various features such as currency denomination, transferability, and tax benefits. Non-Resident Indians (NRIs) can open three types of accounts in India: NRE Account, NRO Account, and FCNR (B) Account.
What is an NRI account?
We have already discussed what NRI stands for.Let us take a comprehensive look at what is an NRI account. Non-Resident Indians (NRIs) can open three types of accounts in India: NRE Account, NRO Account, and FCNR (B) Account.
People who have lived outside of India's geographical regions for at least 120 days in a year and have spent less than 365 days in India in the past four years are eligible to create NRI accounts. This is because, under the Income Tax Act of 1961, such individuals' residential status would convert to that of an NRI. If a person leaves India intending to work in another country, he or she will be declared an NRI straightaway.
It is critical for NRIs to grasp the differences between the three bank accounts that are available to them in India. It makes it easier for them to meet their investing goals, their financial obligations, and make suitable plans for their residency.
Based on the NRI account they opt for, NRIs can open these accounts with earnings generated either in India or in their place of residence.
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Types of NRI accounts
NRIs in India can open three types of accounts: NRE (Non-Resident External Account), NRO (Non-Resident Ordinary Account), and FCNR (Foreign Currency Non-Resident) bank accounts.
The key differences between the accounts are:
What is an NRE account?
The Non-Resident External or NRE Account makes it easier to transfer money generated overseas to India. It is a rupee-dominated account that's repatriable, meaning you may send your international earnings back to India. The interest you earn on the NRE account is tax free.
Simple interest is a technique used to calculate the proportion of interest paid on a sum over a set time period at a set rate.
What is an NRO account?
With revenue received within India, a Non-Residential Ordinary or NRO Account can be formed and held in INR values in that deposit account. Rent, dividends, and other sources of income are all possibilities. There is no barrier to currency conversion in an NRO account because deposits are done in rupee denominations.
What is an FCNR (B) Account?
The FCNR (Foreign Currency Non-Residential Account) permits Non-Resident Indians or Persons of Indian Origin to make deposits in foreign currency. NRIs or POIs can make these payments in the denomination of their home country, and they must be held in any of the foreign currencies prescribed by RBI in that account.
Many NRI accounts exist and can be used for earning decent returns. In the article, we discussed what is an NRI Account, NRE meaning and much more. If you have any doubts regarding the accounts, head over to the IDFC FIRST Bank webpage, where you can find all the details you may require on the topic.
IDFC FIRST offers access to NRI savings account. It offers high exchange rates, monthly interest credits on NRE/NRO savings account, and access to a dedicated relationship manager. Visit the website to get started!
Disclaimer
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