Unlike the Indian citizens, NRIs cannot maintain a standing resident savings account in Indian banks. But, NRIs can manage their earnings in India and abroad with NRO or NRE accounts. Read on to know more.Many Indians who move overseas for studies, a better job, or expanding their business operation have one important concern, i.e., how to manage their finances. They need a bank account to manage and remit their earnings in India and abroad.
As an NRI (non-resident Indian), you can open a bank account with any bank of your choice in India. However, the Reserve Bank of India (RBI) has certain guidelines for NRI bank accounts. You can open and operate two savings account types – NRO (Non-Resident Ordinary) and NRE (Non-Resident External).
NRO Account
The non-residential ordinary account is specifically meant for NRIs who have a source of income in India through property rent, returns from investments, business profits, etc. You can open an NRO account as a savings account or term deposits and manage your funds originating from India in an Indian bank. The deposits are to be made in INR, and hence it gives you the flexibility to withdraw funds and make payments as and when needed; there is no risk of loss due to currency rate fluctuation.
Another significant feature of the NRO account is that you can use the funds to invest in mutual funds, shares, and other investments. If you are looking for a safe investment option in India, you can open an NRO fixed deposit account and earn decent returns. Remember, the interest earned on NRO is subject to TDS (tax deducted at source).
NRE Account
A lot of Indians who settle abroad and earn income through salary prefer opening a Non-Resident External account. It allows you to deposit your foreign earnings in an Indian bank, but the amount is converted into INR as per the exchange rate at the time of deposit. So, it is important that you be aware of the prevailing exchange rate to get maximum value for your deposits.
Another significant feature of an NRE account is that you can appoint an Indian resident to operate your account on your behalf by signing a power of attorney in their favour. The funds in your NRE account are freely repatriable, which means you can transfer the funds to any other NRE or NRO account or your overseas bank account.
Advantages of opening an NRI savings account
A lot of NRIs living abroad wish to invest in the Indian investment market. By having an NRI savings bank account in India, you can partake in the investment schemes of your choice. You can direct the funds towards the investment schemes through your savings account.
Getting tax benefits is an important aspect of financial planning. A lot of NRIs invest in different schemes to reduce their tax liability. If you hold an NRE account, the interest earned on savings and term deposits is tax exempted.
While the primary purpose of opening an NRI savings account is to keep your earnings secured and enjoy the liquidity of funds, you can also earn valuable returns from it. The interest rate for NRE and NRO accounts is marginally higher than the interest offered to the resident Indian savings account.
Who should open the NRI savings account?
All NRIs can open a savings account to maintain your earnings in an Indian bank. But, you must choose the right type of account to suit your needs. For example, if you have an income source in India, an NRO account will be more suitable. If you are employed abroad and want to remit funds to your family in India, an NRE will be a better choice.
