As an NRI living abroad, we are often required to send our overseas income back to India and vice-versa or we need to manage our Indian investments. Most of the banks in India offer two types of accounts for NRIs: NRE (Non Resident External Account) and NRO (Non Resident Ordinary Account). ICICI, HDFC and SBI are some of the most popular banks for NRI services in India. In this blog, we will discuss the advantages of opening NRE/NRO accounts and the process of how to open NRE/NRO account in India.
Its important to note that both NRE and NRO are accounts maintained in Indian National Rupee (INR). Before we go any further, lets understand what each of these account mean:
It is a savings account required for managing your foreign income earned outside India. One can transfer his overseas earning into NRE account and earn a tax-free interest. All the funds (Principal + Interest) are repatriable (i.e. they can be transferred back to the overseas country).
It is a savings account required for managing your income earned in India while living overseas. The income can be from any source like rent, pension, dividend etc. Interest earned on NRO account is fully taxable (TDS@31% is applicable subject to Double Taxation Avoidance Agreement(DTAA) with other countries). Also, repatriation of funds from NRO accounts have a limit of 1 million USD per financial year.
Do I need to open NRE/NRO account:
According to the RBI regulation, one cannot hold resident savings account with any bank in India after you legally change your status to NRI (As per Foreign Exchange Management Act,a person is a NRI if he doesn’t stay in India for 183 days or more during the preceding financial year starting from 1st April to 31st March). So, if you have stayed any longer than 183 days in a financial year, you should open NRE/NRO account. Typically, one should open one NRE and one NRO account preferably with the same bank. You can use NRE account to park your foreign earnings in India and enjoy full and free repatriability of your funds along with tax benefits as well. Meanwhile, you should use NRO account to manage your income in India like rental incomes, paying EMIs, insurance premiums etc. If you hold Saving account with the bank that offers NRE services, I would recommend to convert your saving account to NRO and open a new NRE account with the same bank.
How to Apply:
- ICICI and HDFC bank have free callback facility from their respective customer care for NRI services division. They should call you back within 5-30 minutes and explain you the complete process. In my experience they were quite resourceful and patiently explained the complete process while answering all my queries.
- Download and fill up the account opening form. (here for ICICI).
- Gather a photocopy of these documents, attest and send them across to their respective offices. You can also have them arrange for a pick up of your documents.
- Passport – First and last four pages of current passport
- VISA/WorkPermit/Residency Visa.
- Residence Proof: Utility bill, bank statements or driving license. (Check this link for a complete list of valid address proofs).
- PAN Card.
- It typically takes 5-10 business days for the account conversion or to open NRE/NRO account from scratch.
- Bank should send you a new check book and debit card for the either accounts. If you do not receive them, feel free to follow up with the banks.
Few points to remember:
- A joint NRE account can be opened in the name of two Non Residents only.So,you cannot open a Joint account with a Resident Indian. However, a NRO account can be held jointly with a Resident Indian as well.
- If you live in US and is looking for safe high yielding interests on your deposits, NRE accounts is a great option. You can repatriate all the money back to US at any given time without any limitations.
- A recommended way for transferring money from India to US is by first transferring money from NRO account to NRE account (there is a limit of 1 million USD per financial year). You should follow the right procedure as there are some tax implications of doing so (Form 15CB and Form CA). I would recommend getting in touch with an Indian CA to get this done. If you want to know more about the process, feel free to write into me at firstname.lastname@example.org.
- Apart from ICICI, HDFC and SBI, there are some other banks that offer these NRI services too: DBS bank, Kotak Mahindra, Yes Bank and HSBC Bank. (From what I have seen, Yes Bank offers best interest rates on NRE/NRO accounts).
- If you have been a long-time and loyal customer with HDFC Bank, they can assign a relationship manager for you. They can be of great help for managing your deposits and investments in NRI accounts.
- Some of the banks might try to upsell you with Wealth management products. Be careful and extremely cautious while choosing them.
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