Managing money matters in the home country can be a significant stress point after moving overseas. The best way to handle finances from abroad is to open a bank account designated for NRIs. Read on to learn more.
Planning to settle in a foreign country and wondering how you will manage your finances back home in an efficient manner? Moving overseas can be a tad tricky when it comes to money matters. Here is where a Non-Resident Indian (NRI) account comes into the picture. As per the Foreign Exchange Management Act (FEMA), once your status changes to NRI, it is illegal to maintain Indian bank accounts.
Thus, it makes sense to convert an existing bank account into an NRI account to facilitate transactions smoothly, be it investments, buying property, parking your earnings, or fulfilling financial obligations. NRIs can open savings, recurring, and fixed deposits. You can opt for a Foreign Currency Non-Resident (FCNR) Account or Non-Resident External (NRE), or Non-Resident Ordinary (NRO) account. Let’s look at what benefits these NRI accounts have to offer their patrons.
- Investment in Financial Instruments:NRIs can invest in the Indian stock market, and other financial instruments like equity shares or debt funds through their NRE/NRO accounts provided they have a trading and Demat account. NRIs can make such investments under the Portfolio Investment Scheme (PIS) of Reserve Bank of India (RBI) or NRI Portfolio Investment offered by financial institutions. However, intraday or short selling is not permissible.
- Tax Benefits:According to the Income Tax Act 1961, the interest accrued on NRE and FCNR (B) accounts is entirely tax-free in India for non-residents. However, NRIs need to verify whether global earnings are subject to taxation in the country they are currently staying in. In the case of an NRO account, the interest accumulated is taxable as per the investor’s tax bracket.
- Easy Repatriation of Funds: The NRE and FCNR accounts (savings & FDs) are incredibly flexible when it comes to repatriation of funds. The principal and the interest earned from these two accounts can be transferred overseas in any foreign currency. For the NRO account, the RBI has imposed some restrictions. Repatriation is allowed only after the applicable taxes are paid on income earned by the NRI in India. And yes, only a maximum of USD 1 million can be remitted in one financial year.
- Low Minimum Balance:The minimum amount needed to open an NRI account is Rs.10, 000 or its equivalent amount in foreign currency. Furthermore, only Rs.10, 000 is required to maintain an average monthly balance. Individuals who fail to keep up with this condition have to pay service charges.
- High Rate of Interest:Most banks offer a high-interest rate on funds parked in NRE or FCNR fixed deposits. Note that the minimum tenure for enjoying good returns on NRI term deposits is one year, and no interest is payable for deposits broken within a year. In general, the premature closure of NRI fixed deposits doesn’t attract penalties, but the rule may vary from bank to bank.
An NRI account is a safe investment tool that provides tax exemptions, reasonable interest rates, and smooth repatriation of funds, etc. Not to mention, the process to open NRI accounts in India is a breeze. So what are you waiting for? Assess your monetary needs and select the banking product that meets your requirements to enjoy the numerous benefits.