A Dummys Guide To The Various Facts About An Nri Account

The Foreign exchange Management Amendments act of 1999 governs the foreign exchange

brought and sent out of India, and takes care of the banking sector for the NRIs in the country.

About NRE account- This account can be held as a savings, current or fixed account. The earnings from this account arent subjected to income tax or wealth tax. First of all, the foreign exchange deposits received for credit of this account are converted to Indian rupees at the buying rates of the banks.

About NRO account-The interest rates on the earnings on this account are not exempted from income tax or wealth tax. This account can also be opened with funds deposited from abroad itself. The funds held in an NRE or an FCNR account cannot be transferred into or from this account.

About FCNR account-This account can be held as a fixed account only. It can be held for 1-5 years. The currency used can be anything be it Canadian Dollar, Japanese Yen, Euro, the Australian Dollar, the Sterling Pound etc. The interest earned on the deposits made to this account is exempt from the Indian Income tax. The principal as well as interest from this account is transferrable outside the country in the same currency or converted into some other currency.

Depending on whether you plan to restore the currency into foreign currency to take it abroad and the currency you want to maintain the account in, you can choose your pick of NRI account. The NRE and the FNCR accounts are best if you are looking to restore your funds to your country without the money being levied by tax. If you decide to stay in the country permanently, and want your account to restore your foreign funds as well as your Indian earnings, then the NRO account is suitable for you.

When you decide to settle down in India and start working here, you will have to start paying the taxes on your earnings. Keep in mind that you dont have to pay double taxes on the earnings you already paid the taxes for when you were working abroad. Know more about the double taxation treaty signed between India and other countries. To avail this, you have to submit your residency certificate at the time of opening your bank account.

In 2011, the RBI gave the option for residents of India to include an NRI relative in their respective resident bank accounts on either former or survivor basis. The NRI relative cannot handle that account during the residents lifetime.

Thus, having a NRI banking account will let you have easy access to your funds and also minimize the risk of currency rate fluctuations.

by: Harsha Maitra

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