All about NRI Banking

What Exactly Is NRI Account?

As the name suggests, Non-Resident Indian, an NRI account is basically a person that has an account in an Indian bank but is not an Indian resident. An NRI banking account is offered by a number of banks. It is a great option for all your banking needs. In fact, it is a handy tool.

Banks offers various NRI banking options. Various products and services are provided that help in your NRI banking. There are a number of benefits associated with NRI banking. Some of them includes:

• Convenient banking solution – One of the significant advantage related to NRI banking is that it offers access to the banking system completely depending on the foreign and local needs. Furthermore, you can rely on it for quick financial transfer and even currency exchange.

• Time-saving – Another benefit offered by NRI banking is that it offers quick and easy access to the funds. This further ensures that you do not have to ring your Indian friend for any financial needs.

• Interest rate – You should also know that NRI banking accounts also offer an ability to compare the interest rates. It also provides an excellent earning potential between both abroad and home. 

Types of NRI Accounts

There are two major types of NRI banking accounts such as:

• Non-Resident External Account (NRE) – This type of account is defined when you deposit foreign currency while opening your account in an NRE account.

• Non-Resident Ordinary Rupee (NRO) – This type of account is called when an Indian who is going abroad with the intention of becoming an NRI.
What to Consider When Opening an NRI Account?

Following are the steps one need to consider when opening an NRI banking account:

• Choosing a bank – This is one of the major and the first step towards opening your NRI account. With so many banks offering this option it is wise to make a right choice. Choose the bank that meets your banking needs and requirements. One major aspect you need to keep in mind is to know whether the bank is authorized by the Reserve Bank of India (RBI).

• Account type – Now that you know there are two major NRI account types, choose the one wisely. Keep all your aspects in mind when making a choice.

• Online and offline banking experience – You will find banks offer both online as well as offline NRI banking solution. Ensure you apply for online banking too as it is convenient and hassle-free.

You will have a lot of people calling to open an NRI making. Stay away from these people as they might be fraudsters too. One of the best ways to open your account by visiting the bank. No matter which foreign place you reside in, the NRI banking solutions ensure you have economic links forever.

What should you do when you transfer money to the wrong account?

Transferring fund from one location to another requires careful consideration. This is no different for those sending money to India. But there will come a time, where there is a chance of sending funds to the wrong account. This can occur due to human error, discrepancies in the account number, IFSC code or both, or even a technical glitch from the banking institutes end. In this case, the most important thing to remember is that if a transaction has been made, it cannot be reversed without approval from the beneficiary.

When this occurs, surely you would not want to run around from pillar to post to get the transaction reversed. So what do in when this occurs? Here are the steps you need to take:

Take a quick action

The first step you need to take is to inform the bank or the bank manager as soon as the transaction has been made. In the occasion you have entered a bank account that does not exist, the funds will automatically be returned to the account. However, if the account number you have entered exists, then you must contact your bank manager. You must then provide relevant evidence that you transferred your funds to the wrong beneficiary’s account. If the unintended beneficiary and the intended beneficiary share the same name, you will need to prove the transfer itself was wrong, even before the bank could provide assistance. The action that bank will consecutively take will also depend on the type of bank account you have sent to. If the unintended bank is of the same bank, the bank will act as an intermediary to transfer the funds back to the original account or reverse the transaction. However, if the beneficiary is of another bank, then you would be required to approach the bank and meet the manager to get the ideal solution. During this process, ensure that you detail all the steps and process you have undertaken. Emailing the details to the respective parties is one way to keep yourself and everyone in the loop.


What if the wrong beneficiary refuses to return the funds?
If you are sending money to India to an account, where the account holder refuses to send funds back home, here are a few steps you can follow:

• The first thing you must remember is that you cannot take back the funds without the consent of the wrong beneficiary. In this case, the beneficiary must accept that the transaction made was a mistake.
• In this case, you must contact your bank immediately and ensure that they are aware of the update.
• Keep track of your complaint
• You can then seek legal help to gain back the funds if required. This will be a complicated process, especially for international transfers.

The best way to avoid such a situation is to be aware of all the data you are inputting before you make the transfer. Additionally, always cross check all the details before going ahead with the transaction. After all, it is your hard earned funds.

RFC: the ideal financial solution for returning Indians

As Indians who are traveling back home permanently, considerable planning would be required to be undertaken. This is no different for the financial investments one has made. But instead of transferring all the funds to the local account, you can convert the account into a resident foreign currency account, also known as RFC. This foreign currency account is ideally the best choice for NRI’s who want to park their foreign funds in India while availing its advantages on returning home.

Given below are the attributes which are specific to this foreign currency account and how it can benefit a returning NRI:

Who is eligible to open the account?

Banks and financial institute’s only offer this account if they satisfy certain eligibility criteria. They include:

• Any resident Indian can open this foreign currency account in any freely convertible foreign currency.
• Returning NRI individuals who have stayed abroad for a continuous period of a one year or more.

What are the different foreign currencies that can be maintained in the RFC account?

As previously mentioned, the RFC account can be open in any freely convertible foreign currency. They include currencies such as the Australian dollar, Canadian dollar, Euro, Great Britain Pound, Japan Yen and the US dollar amongst many others.

What kind of funds can be deposited in this account?

Funds from selected sources could have been deposited in this account. They include:

• Any funds retained in any foreign bank account, in the local foreign currency.
• Any funds that are earned through business or employment abroad. This can also include income earned through interest or dividends.
• Any funds received in the form of superannuation or pension received from a foreign employer.
• Foreign exchange funds that have been received from the sale of assets such as shares, bank accounts, immovable property or any other form of investments held by individuals outside India.

What is the range of interest rates that can be expected in the RFC account?

The RFC account can be held in different forms. Depending on the different forms the interest rate will differ. It also depends on the tenure as well as the currency. This account can be held in:
• term deposits
• current accounts
• saving accounts

What are the tax implications credited in the RFC account?

As per the Income Tax Act, Section 10(15)(iv)(fa) of the Income Tax Act,the interest earned on foreign currency deposits in any Indian Banks is exempted for non-residents and Resident but not Ordinarily Resident. Most returning NRI’s are considered as RNOR’s till their status is changed to resident.

What is Money2India?

There are plenty of services that allow you to send funds from different countries to your home country in India. Amongst these various options available in the financial market, the online money transfer service is one of the most popular services.

Plenty of banks are offering this service, through the transfer platform known as the Money2India. As the name suggests, it specializes in offering online transfer services from several yet selected countries abroad to India. As compared to the other online services, this platform has plenty of benefits and other additional services, which have been mentioned below.

How can you send money overseas with Money2India?

Plenty of banks within India possess this platform, which allows you to connect from one bank to another. Thus, you can easily send funds overseas, by using this Money2India platform, to over 100 Indian banks. The first step you need to take is to open an account, by filling a registration form and providing:
• Details of your resident country
• Details pertaining your identity
• Contact details

How can you send money to India through this platform?

There are two methods wherein you can send your funds back home. They include:

• Express online transfer: This service is normally offered to selected users. You can use this service to transfer funds to the account within the same bank, or to another bank. However, the time take for each service will be different. You will also have additional benefits depending on the amount of funds you are sending. For example, if you send more than 50, 000 INR you can get a transfer free service. However, any amount less than that will attract a small amount of transfer fee. To opt for this kind of transfer, you will need to log into your account and select the relevant option. You will also need to fill in the relevant details of the recipient and enter the details of the funds you would want to send. Once the transfer has been made, you can review the details of your transfer and send your funds. You will also be given a tracking number that will allow you to monitor the progress of your transaction as per your convenience.

• Normal online transfer: The e – transfer offer is nothing but an automated clearing house transfer option that provides a guaranteed transfer. Normally, it offers the same fee structure as the previous option wherein you will need to log into your account, and provide bank account details of the sender and receiver. The platform will then initiate small transactions from the sender’s account in order to verify your details. Once this process has been completed, you will be provided with details of your transactions.

NRO account: All you need to know about fixed NRO fixed deposits

The NRI account is an ideal option to consider investing funds from abroad or from the resident country. Amongst the different options that are available, the NRO account fixed deposit is one option to consider, especially when investing funds for a long-term purpose. This type of NRO account is best used to manage income that is earned in India through the form of dividends, rents or even pensions earned from other countries.

The funds that are invested in this account is held in the local currency, which is INR. Not only does it make it convenient to consolidate earnings from India, but it also makes it easier to access the funds in the local currency. Additionally, one of the main features that the account holder must be aware of is the repatriate limit for the financial year, which is about 1 million USD.

Apart from this, there are additional features of this type of NRO account that must be taken into consideration. They include:

• Taxation: This FD attracts taxes as per the Indian laws. As per the Income Tax Act, 1961, the interest earned on the account is over 30%. Therefore, careful consideration must be made when investing in this account so as to ensure that the amount invested does not attract taxation.

• Repatriation: NRO fixed deposits do not offer the option to repatriate funds, especially on the principal investment. However, the interest earned from the NRO fixed deposit can be transferred to another foreign account.

• Joint account: The NRO account can comprise of a single or joint account holders. However, an NRI account holder can hold a joint NRO account only with an Indian resident citizen.

• Deposit and withdrawal: Funds that have originated from India can only be used to open an NRO account, which in turn can be used to open an NRO fixed deposit. However, no funds from abroad can be used to open the NRO fixed deposit. But, funds from an NRE account can be transferred to the NRO account in order to open a fixed deposit account. If the account holder would want to withdraw funds from the account, it can only be withdrawn in Indian rupees.

• Interest rates:  The interest rate involved in the NRO fixed deposit account will differ according to the current market conditions, as well as the bank you are applying in. Therefore, before opening the account, you must first check the available rates to know which the best one to suit your needs is. The maturity of such a deposit can last anywhere between a year to 20 years.

NRI and income tax: Rules you need to follow

No doubt, as an NRI, you will have unrestricted access to plenty of facilities and amenities, which also includes several financial opportunities. At the same time, you will also have the opportunity to invest in several financial options back home, such as an NRI account or deposit.

However, like an Indian resident, you will be required to pay certain income tax. Here are a few rules you need to keep track of, about the income tax:

• As per the current government regulations, an NRI will have to pay tax on any income that is accrued or raised in India or even received in India. Therefore, income that is earned through salary, rental income, interest income from a fixed deposit or bank account is taxable. Even capital gains on any asset that is sold come under this category. If the income of an NRI is more than the exemption limit in the financial year, the individual is liable to file returns in India. In order to claim tax refunds or to carry forward any losses in the future, the individual will be required to file returns.

• If an NRI returns to India permanently after spending a fixed amount of years abroad, the foreign income that is earned is not taxable immediately. In this case, an individual who has been a non – resident for nine consecutive years will remain an RNOR, which is a transition between an NRI and a resident. As per the government regulation, any income which is earned outside the country will not be taxed, unless it is a business or profession that is controlled from India. Once the status has been transferred to a’ resident’, the international income that is earned will be taxed in India.

• Previously, an NRI would be required to pay TDS if the individual did not possess the PAN document. The TDS would be charged at 20% or the rate in force, whichever was higher. As per the current budget, there is no requirement to pay TDS if no PAN documents have been provided. However, certain set of documents under the recently notified rules, must be provided to avoid paying TDS.

• NRI’s cannot open a public provident fund, which is the PPF. However, if the individual has already possessed a PPF account previous to becoming an NRI, the account can be held only until the time of maturity. At this time, the account will not have the option to be extended, whereas the funds would have to be remitted in the NRI account, in the country of residence. In case, post maturity, the account is left unattended; it will be considered as "extended without contribution.

What are the tips to keep in mind when transferring funds abroad?

Transferring funds from location to another will be a stressful process, especially if you are doing it for the first time or if you are sending a large amount of funds. On the contrary, when you know a bit of the ins and outs of international money transfer you can rest easy, knowing that you have the possibility to save funds and time while enjoying a peace of mind as well.

Being aware of how to make a transfer will require a few components, namely, keeping track of your affordability, safety, security, reliability, knowledge and common sense. At the same time, you can follow certain tips to ensure that you have a smooth and successful money transfer. They include:

Being aware of the current exchange rates: With the international money transfer, most individuals are unaware that the biggest fee comes the exchange rate itself. This is based on the interbank exchange rate, which is used by major international banks to trade amongst themselves. Additionally, it also affects the overall money transfer, exclusive of a fixed sending or receiving a fee. However, very few members of the public will have access to the interbank rate or are even aware of it. By being aware of this rate, you can calculate the best rate for your financial transfer. 

Be aware of transfer fees: One of the main factors you need to be aware of is the transfer fees. Transfer fees can be added to the transaction from the sender’s side or the recipient’s side. The best way to benefit from this service, is to look out for a bank or financial institute that will provide you with reasonable or discounted transfer fees, especially for overseas payment.

Be safe and secure: All banks and financial institutes are regulated by a particular financial body that regulates all transactions and services about any financial facilities. Before you opt for a transfer service, check for the safety regulations followed by these institutes and if they comply with the local or international standards. At the same time, ensure that you can easily contact the customer service team, without being diverted.

Review the reasons why you are making an international money transfer: There are plenty of reasons why you would be in a position to send funds abroad. They can include:

• Purchasing a property for your retirement years
• Facilitate a business that involves international customers or suppliers.
• Facilitating the expenditures of a college student who has resided abroad
• Sending and receiving invoice funds as a freelancer
• Financing a family event
• Financing purchases during auspicious events or festivals.
• Or even relocating for work.

Based on your requirement you can opt for a provider that will handle your type of money transfer, thus providing you with the peace of mind.