An NRI account or Non-Residential Indian account is such an account that is maintained by an NRI with a financial institution that is authorized by the Reserve Bank of India to render such services. There are two different types of bank accounts in India by which NRIs can manage their income earned in India. The two accounts are the Non-Resident External (NRE) account and Non-Resident Ordinary (NRO) account. A person can open both these accounts in the form of savings, current, recurring or fixed deposit accounts based on his/her requirements. An NRO account is basically a savings or current account to manage income that he/she earns from dividends, rent or pension from abroad. Any NRI can open a NRO account. The NRO account is generally used for domestic or local sources of income.
The benefits of NRO account are:
• It provides higher returns after tax deductions. This can be done by availing the DTAA benefit facility.
• An NRI can maintain this account by keeping a monthly balance as low as Rs 10000.
• A NRO account allows for hassle-free transfer of money through a number of online and offline modes.
• An NRI can earn from favorable interest rates. This account provides 4% p.a. interest rate if your end of day balance is equal to or greater than Rs 50 lakhs. The interest rate for end-of-day balance less than Rs 50 lakhs is 3.50% per annum.
• The interest that you earn in the current financial year is fully repatriable after deduction of taxes. For a bona fide purpose, funds in an NRO account can be repatriated up to 1 million dollars in US currency.
Unlike a NRE account, a NRO account is taxable at the applicable rate. This account also does not allow you to send money to a foreign country. The various features of a NRO account are as follows:
• NRO accounts are taxable and so various taxes like income tax, wealth tax and gift tax are applicable. However, the Double Taxation Avoidance Agreement provides some relief from taxation.
• A NRO account allows you to deposit funds from a foreign country and also those funds that originate in India. You can only withdraw in Indian National Rupees from this account.
• Unlike a NRE account, a NRO account can be held with another NRI as well as a resident Indian. Generally, the resident Indian is a close relative of the person and this benefit is defined under Section 6 of the Companies Act 1956. Furthermore, a person can transfer funds from an NRO account to another NRO account. But a person who holds a NRO account cannot transfer money to another NRE account.
• NRO accounts are not subject to exchange losses like day-to-day fluctuations in the value of INR and conversion loss. Thus, your money is absolutely safe in a NRO account.
The benefits of NRO account are:
• It provides higher returns after tax deductions. This can be done by availing the DTAA benefit facility.
• An NRI can maintain this account by keeping a monthly balance as low as Rs 10000.
• A NRO account allows for hassle-free transfer of money through a number of online and offline modes.
• An NRI can earn from favorable interest rates. This account provides 4% p.a. interest rate if your end of day balance is equal to or greater than Rs 50 lakhs. The interest rate for end-of-day balance less than Rs 50 lakhs is 3.50% per annum.
• The interest that you earn in the current financial year is fully repatriable after deduction of taxes. For a bona fide purpose, funds in an NRO account can be repatriated up to 1 million dollars in US currency.
Unlike a NRE account, a NRO account is taxable at the applicable rate. This account also does not allow you to send money to a foreign country. The various features of a NRO account are as follows:
• NRO accounts are taxable and so various taxes like income tax, wealth tax and gift tax are applicable. However, the Double Taxation Avoidance Agreement provides some relief from taxation.
• A NRO account allows you to deposit funds from a foreign country and also those funds that originate in India. You can only withdraw in Indian National Rupees from this account.
• Unlike a NRE account, a NRO account can be held with another NRI as well as a resident Indian. Generally, the resident Indian is a close relative of the person and this benefit is defined under Section 6 of the Companies Act 1956. Furthermore, a person can transfer funds from an NRO account to another NRO account. But a person who holds a NRO account cannot transfer money to another NRE account.
• NRO accounts are not subject to exchange losses like day-to-day fluctuations in the value of INR and conversion loss. Thus, your money is absolutely safe in a NRO account.
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