After becoming a Non-Resident Indian (NRI), you can not have resident bank accounts as per The Foreign Exchange Management Act (FEMA) 1999. You have to close them or convert them to NRI accounts.
There are three primary types of NRI accounts one can open:
- Non-Resident Ordinary (NRO)
- Non-Resident External (NRE)
- Foreign Currency Non-Resident (FCNR)
NRI Accounts – Differences
Let’s look at the Key differences between the accounts mentioned above:
| Particulars | FCNR | NRO | NRE |
|---|---|---|---|
| Denomination | Foreign currency | Indian currency | Indian currency |
| Type of Account | Recurring Deposit/ Fixed Deposit | Current account/ Savings account/ Recurring Deposit/ Fixed Deposit | Current account/ savings account/ Recurring Deposit/ Fixed Deposit |
| Repatriability of Funds | No restrictions | No restrictions on interest earned, and the principal is repatriable up to USD 1 million. | No restrictions |
| Taxation on interest income | Exempt | Both principle and interest are taxable. | Exempt |
| Joint Account Holding | N/A | There are no restrictions on interest earned, and the principal is repatriable up to USD 1 million. | Both the Parties have to be an NRI |
| Transfer of fund | You can transfer funds from an NRO to another NRO account, but you cannot transfer funds from an NRO account to an NRE account. | An NRE account allows you to transfer funds to another NRE account as well as to an NRO account | |
| Change in Residential Status from NRI to Resident | Two options: 1) The account is allowed to continue till maturity at the contracted rate of interest 2) Convert the account to Rupee Deposit Account or Resident Foreign Currency Account. | Either convert the NRI account to a resident account or move the funds to the Resident Foriegn Currency account. | NRO accounts may be designated as resident accounts. |
Interest Rates
The following table shows a bank-wise comparison of the interest rate, minimum balance and debit card fees:
| Bank Name | Min Balance | Rate of Interest – Balance | Debit Card Fee |
|---|---|---|---|
| ICICI | ₹10,000 | 3% – amount < ₹50 lakh 3.5% – ≥ ₹50 lac | ₹299 + GST |
| Kotak | ₹10,000 | 3.5 | ₹200 + GST |
| HDFC | ₹10,000 – Metro/Urban ₹5000 – Semi Urban ₹2500 – Rural | 3% – < ₹50 lac 3.5% – of and above ₹50 lac | NIL for the first year; ₹500 + GST second year onwards |
| Axis | ₹12,000 – Metro/Urban ₹10,000 – all other locations | NRE – ₹200 +Taxes NRO – ₹150 +Taxes | |
| IndusInd | ₹10,000 – Metro/Urban ₹5000 – Semi-Urban | 3.5% – up to ₹1 lac 5% – ₹1 lac to ₹10 lac 6% – ₹10 lac to ₹25 lac 6.75% – ₹25 lac to ₹5 cr | NRO – Regular Debit Card Issuance ₹249 + Annual ₹249 |
| Equitas | ₹10,000 for Metro & Urban Branches ₹5000 for Semi Urban Branches ₹2500/- for Rural Branches. | 3.50% – Up to ₹1 lac 5.25% – Above ₹1 lac and upto ₹5 lac 7.00% – Above ₹5 lac and upto ₹50 Crs 7.50% – Above ₹50 Crs | ₹125 – Issuance + tax; depending on the card variant |
| IDFC | ₹25,000 | 3% – up to 1 Lac 4% – Above 1 lac to 5 lac 7% – Above 5 Lac to 25 Cr 6.75% – Above 25 Cr to 50 Cr 5% – Above 50 Cr to 100 Cr 4.5% – Above 100 Cr to 200 Cr 3.5% – Above 200 Cr | Free |
Note: Each bank has a penalty for not maintaining a minimum balance.
Key consideration
While opening an NRI account, you must also consider the following things in addition to the interest rates:
- Debit Card with the appropriate transaction limit.
- Easy to user interface of the web application/mobile app
- Customer Support
- UPI Support
- Convert existing bank account for uninterrupted banking – EMI, SIP etc.
NRI Accounts – FAQ
The existing savings account will be converted to an NRO account, and a new NRE account will be opened.
Yes, one can have multiple NRE and NRO accounts with different banks or with the same bank but different types of NRE and NRO accounts.
That would be a violation of the FEMA Act. The penalty would be up to 3X the sum involved or up to 2 lac if the amount is not directly quantifiable. If the situation continues without resolution, the penalty can be compounded up to 300% of the amount in question.
The applicant needs to provide self-attested copies of the following documents:
– Passport: First and last two pages of the passport (pages with your name, address, date of birth, date and place of issue, expiry date, photograph and signature).
– Valid work permit/employment visa/residence visa/residence permit
– PAN Card copy
– Address Proof: Both the Indian and overseas address proof. If the Indian address proof is not in your name, one needs to submit an additional form seeking approval of the person (blood relation) having an address proof in his/her name.
One pays TDS just like a regular savings account. However, you can avoid double taxation under the Double Taxation Avoidance Agreement by providing the following documents:
– a self-declaration in the prescribed format
– a self-attested PAN copy
– Form 10F
– a tax residency certificate for the current year
References: