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Five types of NRI accounts
1. Non-Resident (External) Rupee
Accounts (NRE Accounts)
NRIs, PIOs, OCBs are eligible to open
NRE Accounts. These are rupee denominated accounts. Accounts can
be in the form of savings, current, recurring or fixed deposit
accounts. Accounts can be opened by remittance of funds in free
foreign exchange. Foreign exchange brought in legally,
repatriable incomes of the account holder, etc. can be credited
to the account. Joint operation with other NRIs/PIOs is
permitted. Power of attorney can be granted to residents for
operation of accounts.
The deposits can be used for all
legitimate purposes. The balance in the account is freely
reportable. Interest lying to the credit of NRE accounts is
exempt from tax in the hands of the NRI.
Funds held in NRE accounts may be
freely transferred to FCNR accounts of the same account holder.
Likewise, funds held in FCNR accounts may be transferred to NRE
accounts of the same account holders.
2. Ordinary Non-Resident Rupee
Accounts (NRO Accounts)
These are Rupee denominated
non-reportable accounts and can be in the form of savings,
current recurring or fixed deposits. These accounts can be
opened jointly with residents in India. When an Indian National/PIO
resident in India leaves for taking up employment, etc. outside
the country, his bank account in India gets designated as NRO
account.
The deposits can be used to make all
legitimate payments in rupees. Interest income, from NRO
accounts is taxable. Interest income, net of taxes is
reportable.
3. Non-Resident (Non-reportable)
Rupee Deposit Accounts (NRNR Accounts)
NRIs/PIOs/OCBs, other non-resident
Individuals/entities are permitted to open these accounts.
Accounts can be opened by transfer of freely convertible foreign
currency funds from abroad, or from NRE/FCNR accounts. Deposits
can be held jointly with a resident. Deposits can be for a
period from 6 months to 3 years, and can be renewed further.
Accounts may also be opened by transfer of funds from the
existing NRE/FCNR accounts of the non-resident accounts holders.
The principal is non-reportable;
interest can be repatriated. There is no income tax on the
interest.
4. Non-Resident (Special) Rupee
Accounts with banks in India
NRIs/PIOs presently have the facility
of maintaining bank accounts and undertaking financial
transactions in India subject to certain exchange control
regulations.
In order to simplify the procedures
and to provide greater freedom to NRIs/PIOs for putting through
financial transactions in India, NRIs and PIOs are now permitted
to open bank accounts in India, which will be at par with rupee
accounts, maintained by residents. They can now open
Non-Resident (Special) Rupee Accounts with banks in India which
will have the same facilities and restrictions as are applicable
to rupee accounts maintained in India by residents relating to
repatriation of funds held in these accounts and/or
income/interest earned on them. The scheme, which has become
effective from April 15, 1999 provides that the procedure for
opening such accounts is the same as that of domestic accounts
of resident individuals.
The existing facilities for NRIs/PIOs
to maintain and operate Non-resident (Ordinary) i.e., NRO
account, Non-Resident, i.e., FCNR account also continues. The
repatriation facilities available under these accounts will
continue as before.
5. Foreign Currency (Non
–Resident) Accounts (Banks) (FCNR (B) Accounts)
NRIs/PIOs/OCBs are permitted to open
such accounts in US Dollars, Sterling Pounds, Deutsche Marks,
Japanese Yen and Euro. The account may be opened only in the
form of term deposit for any of the three maturity periods viz;
(a) one year and above but less than two years (ii) two years
and above but leas than three years and (iii) three years only.
Interest income is tax free in the
hands of NRI until he maintains a non-resident status or a
resident but not ordinarily resident status under the Indian tax
laws.
FCNR (B) accounts can also be
utilised for local disbursements including payment for exports
from India, repatriation of funds abroad and for making
investments in India, as per foreign investment guidelines.
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