BY Mr. V. BHAKTHA KUMAR
I. OPERATION OF INDIAN BANK ACCOUNTS BY NRI's
ALL NON-RESIDENT INDIANS (NRls) who wish to send remittances to invest or spend in India
are required to route these transactions through a bank account. As per the requirements
of Section 6 of FERA, 1973, only authorised dealers can deal in foreign exchange (FE)
transactions. Scheduled banks are normally designated as authorised dealers and some
co-operative banks are also permitted to handle FE transactions.NRIs are allowed to
operate bank accounts with any authorised dealers in India.
There are mainly three types of bank accounts available for the use of NRIS.
A) Non-resident (Ordinary) Account (NRO)
B) Non-resident (External) Account (NRE)
C) Foreign Currency Non-resident Account (FCNR)
A. NON-RESIDENT (ORDINARY) ACCOUNT
Who Can Open And How ?
An existing bank account of an Indian national going abroad and becoming a non-resident
Indian is automatically designated as non - resident (ordinary ) account (NRO). A NRI can
also open such ordinary accounts even by making remittances from abroad or by transfer
from an existing non-resident account in India in his own name. Such accounts can also be
opened by Overseas Corporate Bodies (OCBs). NRO account can be opened, while an NRI is on
a visit to India or simply by making remittances from abroad.
NRO accounts can be in the sole name of an NRI or in joint names of more than one NRI or
in joint names with any of the close relatives in India. In other types of joint accounts,
prior permission from the Reserve Bank of India (RBI) is required.
What Type Of Accounts Can Be Opened ?
NRO account can be opened in the categories of current, savings and ten-n deposit
accounts.
What Type Of Transaction Are Permitted ?
All types of transactions of deposits and withdrawals to and from NRO accounts are
normally permitted. However, the RBI has prescribed certain transactions required to be
reported to RBI in prescribed forms.
Can The Funds Be Repatriated?
The funds can be freely withdrawn for local disbursements without RBI approval. Interest
is now repatriable.
Is Interest Earned Exempt From Tax ?
The Interest of deposits in NRO accounts and balances standing to the credit of such
accounts are not exempted from income tax.
B. NON-RESIDENT (EXTERNAL) ACCOUNT (NRE)
Who Can Open And How ?
NRIs as well as OCBs are permitted to open NRE accounts. NRE accounts can be opened by
depositing foreign currency along with the account opening application form that is
account opening form may be signed by an NRI abroad and the signature of NRIs may be
verified by an bank abroad or by Indian embassy or by notary public officials abroad. NRE
account can also be opened during a visit to India by tendering foreign currency
travellers cheques or foreign currency notes.
What Type Of Accounts Can Be Opened ?
All types of accounts that is current, savings and term deposit can be opened under NRE
accounts scheme. NRE account can be opened in single or joint name. However, in case of
account opened in joint name, all the joint holders should be resident of external group
countries.
Can The Funds Be Repatriated ?
As per the Liberalised Exchange Rate Management Systems (LERMS) all the remittances of
foreign exchange to NRE accounts are converted into Indian rupee at the market rate of
exchange and credits are given in terms of Indian rupees. Similarly, at the time of
repatriation the amount to be repatriated is converted into the designated foreign
currency at the prevailing market rate of exchange.
NRE account offers all the facilities of the NRO account plus complete repatriation
without infon-ning the Reserve Bank.
Is Interest Earned Exempt From Tax ?
Interest on NRE account is exempted from income tax and balances to the credit of NRE
account are exempted from wealth tax. Gifts to close relatives in India from NRE account
are exempted from Gift tax.
C. FOREIGN CURRENCY NON RESIDENT ACCOUNT (FCNR)
Who Can Open And How?
All the non-resident Indians, resident in external group of countries and OCBs are
eligible to open FCNR accounts. NRIs and OCBs residents in bilateral group of countries
cannot open FCNR accounts.
FCNR accounts are permitted only in four currencies. (a) Pound Sterling (GBP) (b) US
Dollar (USD) (c) Deutsche Mark (DM) (d) Japanese Yen (JPY) The rate of interest on the
above accounts vary for each type of designated currency.
What Type Of Accounts Can Be Opened ?
FCNR accounts is permitted in the form of fixed deposits for a maximum period of three
years. Cuffent and savings accounts are not available under this scheme.
Is Interest Earned Exempt From Tax ?
Interest earned on FCNR account is exempted from income tax and the balance in the account
is exempted from wealth tax.
How Does It Differ From NRE Account ?
The FCNR accounts, primarily differ form NRE account on the point of fact that the balance
in FCNR account is denominated in designated foreign currency in which the account is
opened and thus unlike NRE accounts; there is no loss either on account of difference
between (Co Sponsorers - Vama Builders) buying and selling rate or on account of
fluctuation in exchange rates. The deposits in FCNR accounts can be withdrawn prior to
maturity date.
What Are The Options Available To A Depositor At Maturity ?
There are three options available to a depositor on maturity of FCNR account (a) To ask
for the repayment in designated foreign currency. (b) To ask for the repayment in Indian
rupees or in any foreign currency other than designated foreign currency. (c) To ask for
the conversion of FCNR account into NRE fixed deposits.
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