Facts you need to know about the NRO account

When a resident Indian becomes an NRI, the whole aspect of financial management will change. The normal rules and regulations pertaining to the residents will be completely for those who come under the NRI category. In this case, the NRI individual will be required to open an NRI account, which can either be the NRE or the NRO account. But in order to access funds and operate any investment in Indian, you can convert the current savings account into an NRO account.

But what is an NRO account? This account can be used to receive foreign remittances and can have a joint holder who is an Indian resident. In addition to this, the RBI also permits repatriations abroad, which is limited by a maximum annual amount.  At the same time, the interest that is earned in this account and credit balances are subjected to respective tax brackets. It is also subjected to wealth and gift tax.

Now that you are aware of what is an NRO account given below are some of the factors that you need to be aware of. They include:

Opening the account: In order to open the account for NRO, you will need to provide certain documents. It is important to provide documentary proof that you, as the account holder is now a non – resident, as defined under the government regulations and Indian tax laws. Once an individual becomes an NRI, he or she is not allowed to hold any bank accounts under the Indian residency status.

Converting the resident saving account into the account for NRO: As mentioned previously, you can get your resident savings account converted into the NRO account when required. However, you will need to submit a certain set of documents. As a part of the conversion process into the non – resident account, you will need to provide documents supporting your identity, your NRI status proof, proof of foreign address and two photographs.

Attesting proof of documents: When submitting the documents for the account conversion, especially when it comes to the proof of residence abroad, it can be submitted in the form of employment details, student status or dependent visa status. It can also be doneunder the copy of a resident permit in the overseas destination. However, this documented proof must be attested by the Indian embassy, notary or an Indian bank with an overseas branch. You can contact your bank to know which are the official institutes they recognise and accept.

Provision of local Indian address: If you as an NRI would want to ensure a convenient ease of operation, you can always mention a local Indian address. Like the previously mentioned documentation process, you will need to provide proof of the address along with attestation proof. 

Are you aware of the benefits of the NRE account?

As an NRI, the residential financial products, rules and regulations will not apply to you. That is because, you will need to opt for a specialised account, designed for the needs and formulated under government regulations known as the NRI accounts. Under this account, you can either opt for the NRO or the NRE account. Each of these accounts has their features and benefits which can be utilised for different purposes.
However, between both the accounts, there the NRE account is an ideal choice. But what is the NRE account? This type of NRI account can be held in the savings or current account, allowing the account holder to repatriate funds that come from outside earnings. The earnings can be easily transferred to India in a convenient and secure manner. The funds that are normally transferred to this accountis done in INR.
Now that you are aware of what is the NRE account, here are the different benefits you will be getting through this NRI account:

Tax benefits: This is one of the most important benefits to opening the NRI account. The interest that is earnedin this account, whether in the savings account or the fixed deposit, is tax-free in India. They are not included in your taxable income. This makes for an ideal benefit, especially if you have any income in India. Due to this factor, investing in an NRE fixed deposit will offer you one of the safest and secure investments that will offer you a high return.

Repatriation benefits: After the tax benefits, the second key advantage to this account is the repatriation benefits. You can easily move funds from the saving account because you can repatriate both the interest as well as the principal amount abroad. In other words, the funds in the account for NRE is fully and freely repatriable.

Low balance requirement: Due to the increase in competition amongst the banking institutes, both public and private sectors, the minimum balance for the NRE account has dropped significantly. Several bank and financial institutions are now opting for Rs. 10,000 as the minimum balance.

High-interest rate: Both the savings and the fixed deposits of the NRE account offer high-interest rates. However, this can vary between the different financial institutions. One of the most beneficial factors of this account is that the interest rate is calculated on a daily closing balance and the interest is paid half-yearly in June and December. With the right calculation and investment strategy, you can easily invest and get high returns.

Convenient benefits: Adding to the list of benefits of the account is convenience. While it can be easy to open an NRE account, you can now open this account online. You only need to fill a form online, take a printout and attach the self – attested copy of the required documents. Once all the required documentation and attestation is done, you can courier it back to India.
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FCNR Account: Are you aware of the pros and cons?

Earning in foreigncurrencyoffers you plenty of benefits, one of which includes, the high conversion rates. But while you, as an NRI, can always exchange the foreign funds for a higher conversion value, you get an added advantage if you invest the funds for a return on investment. This is when the foreign currency non – resident fixed deposit account will work in your favour.

Given below is all that you need to know about the fixed deposit pertaining to the FCNR account.
Advantages:

• The FCNR account works like the fixed deposit. It offers the ideal protection against forex rate risks, especially if they are maintained in foreign currency. In other words, if the funds are transferredin the currency value that it is invested in, it will be done without any loss of exchange.
• Any interest that is earned on the FCNR deposit in India is exempted from the Income tax.
• The FCNR account can have more than two NRI joint account holders. However, a joint account holder with another resident in India is not permitted.
• Funds in the FCNR account can be held in several major currencies, including Pound Sterling, US Dollar, Yen and Euro.
• The principal amount and interest earned are freely repatriable, to the depositor’s country of residence without any restrictions.
• The interest rates on the FCNR term deposits are payable after the end of the first year. The interest is then compounded on a half – yearly basis.
• The tenure of the account offered is not less than one year and not more than three years.

Disadvantages:

• The FCNR deposits are held only in term deposits. It cannot be held in current, savings or recurring accounts.
• There is a risk of investing in an FCNR deposit in a weak bank. The said bank may be unable to pay back the interest or even the invested funds upon maturity. Most credit guarantees in India covers accounts in India to around Rs. 1,00,000 or 1600 USD, which is considered low.
• In the event a financial meltdown occurs, banks may not be able to repatriate funds. One major example is the Greek crisis. Most individuals were restricted from withdrawing over 40 euros from their accounts.
• If the FCNR deposit is withdrawn in less than a year, no interest is payable on the deposit.
• If the account holder wants to take out a foreign currency loan in India against the FCNR accounts, it can be taken by the account holder only.
• The FCNR account can be transferred to the NRE accounts before maturity. However, any premature withdrawals will attract penalties. Additionally, swapping charges are applicable by the bank where the FCNR accountis held.
• The FCNR account can be renewed within 14 days after maturity. If it is not dining, then the bank will fix the interest rate on renewal.

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NRI Home Loan: The ideal checklist to consider before applying for a loan

Plenty of NRI’s who’ve travelled abroad are looking for ways and means to invest in financial products that will earn them an income. Out of the several available options, residential properties have proven to be the ideal investment option.

In order to finance this purchase, you can opt for NRI home loan that will offer you the ideal financial convenience and flexibility. Not only does it cater to the needs of NRI’s such as yourself, but it is also designed to offer the ideal financial benefits at the same time.

So if you are planning to purchase a home with the NRI home loan, here are a few factors on the checklist you need to tick off:

Check your official NRI status: The RBI defines an NRI as an individual who holds a valid Indian passport. Additionally, the individual should be emigrating abroad for employment purposes, or to carry out any business, in a duration of stay that is uncertain. It is these individuals who are employed or carry out business outside India who can apply for the home loan for NRI’s under this scheme.

Maximum loan amount: While you may be able to apply for the loan, the amount you get in the loan will differ on certain factors. For one, your educational qualifications and income will play an important role. Normally, the standard rate for home loans extends to 80 to 85% of the value of the property you want to purchase. However, this will also depend on your monthly income. The maximum a loan amount that will be granted to your will be around 38 to 40 times your gross monthly income. However, some financial institutes equate a calculated EMI by your net monthly income. Even the location of your current employment will be taken into consideration. If you are earning in the Middle East or Europe, you may be viable to get a loan amount that is high.

Loan tenure:The Home Loan interest rate in India for NRI’s is normally higher that the interest rates that are offered to residents. This is due to the increase in the risk factors, and short tenure will be elements to be considered. Normally, the difference usually ranges from 0.25 to 0.5%.

Documents Required: Like any other loan, when you apply for the NRI home loan, you will need to submit a certain set of documents. They will include a copy of your passport, visa, employment, contracts, work permits, salary slips and your NRI bank account statements. You may also need to submit your employment card, especially if you are working in the Middle East.

Repayment of loan: The down payment and the repayment will need to be done in the Indian rupee and not in any other currency. Additionally, the transactions would need to be made through your NRI account with the remittances made from abroad. In the event, your status changes from NRI to the resident Indian, the terms and conditions of your loan will be revisedin accordance with your new income.

How to make a money transfer through NEFT?transfer money online, transfer money to India,

In today’s day and age, sending funds from one location to another is now made easy. However, if you want to send funds to a friend or purchase a forex card for a vacation, your banking cards will offer only little assistance. If you don’t have physical cash in your hand, you may write a cheque. However, it will take sometime to clear.

One way to avoid this lack of funds is by using the National Electronic Funds Transfer also known as NEFT. By using this service, you can transfer funds of up to Rs. 10 Lakh using your own bank account. So if you need to make a transfer money online here are the steps you need to follow:

Step 1: In order to initiate a transfer money to India or any city using the NEFT service, you first need to have access to the net banking service. You will also be required to have some information about the individual or the merchant you would want to transfer the funds to. This would include the account number, type of account, IFSC code and the beneficiary’s name. You will need to log into your account and fund the tab, for the third – party transfers. You will need to click that option where you can further choose between transferring within the bank, transferring to other banks or transferring via a banking card. You can even add a beneficiary from your account.

Step 2: After you add the beneficiary, you will be presented with two additional options, namely to add the beneficiary within the bank or add a beneficiary of another bank. If the receiver has an account in the same bank, you can go for the first option, else opt for the second option. In the next step, you need to input the bank account related details to make the transfer money online. This would include the account number, name and IFSC code. You will get an OTP from your bank to initiate the transfer and confirm it. Once you confirm the transfer, the beneficiary’s account will get added within a few minutes. However, this can depend on your bank.

Step 3: Once the account has been added; the bank will send you an SMS. In order to send money using NEFT, you will need to login to your account. You will then need transfer money to Indiaor within the bank itself. You can choose the account number from which you would want to send the funds and then choose the receiving account number. You will need to enter the amount you would want to send. Once you confirm the transaction, the payment should reach the receiver’s account within an hour’s time.
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How to save your funds as an NRI during the demonetization period

While the whole country has come to the terms of the demonetization move made by the government, NRI’s who have settled abroad around the world, are still dealing with the consequence of it. While the residents can still stand in line to exchange the demonetized notes for the approved ones, NRI’s are still figuring out ways and means to get rid of the old notes, from the approved sources and within the approved timeline. This has obviously risen to a stressful situation for most NRI’s abroad.

Given below are a few questions regarding NRI’s and answers related to the demonetization move.

How do NRI’s residing abroad exchange their old notes which aren’t valid any longer?

As per the government regulation, members would need to exchange their notes in India or authorise an individual to do it for them. However, at the moment, foreign branches of the Indian banks in both the public and private sector are not accepting any cash outside the country. If you are making a trip to India any time before the 30th December deadline, you can exchange or deposit your funds, in the appropriate NRI account, namely the NRO account. This is one of the NRI account benefits. If another individual is making the transfer on your behalf, you will need to make an authorization in writing, to enable the authorised individual to deposit the notes in the bank account in India. When the notes are being deposited, the authorised individual must present a valid identity proof to deposit the funds on your behalf. If the funds are with you abroad, you can send the funds across India through a trusted individual and make the deposit on your behalf.

Can NRI’s deposit all their cash in the appropriate NRI account?
NRI’s can deposit their funds, only in NRO account. This is part of the NRI account benefits for the NRO account, as only Indian currency can be deposited. However, if you are depositing an amount of Rs 2.5 lakh in the account, it will be reported to the tax department. It will then be matched with your income tax returns, wherein which, suitable action will be taken.

Can Indian residents who are travelling abroad exchange old denominations for the local currency if they have no source for exchange?

As mentioned previously, the notes can only be exchanged in the country. Therefore, those who are travelling abroad will need to wait to return home to India before they can exchange the notes. If you need to use funds, banking cards or traveller's cheques would be required to purchase local currency.

Can Indian currency be used in Nepal where it is used?

The Indian government had every right to demonetise its currencies. As of now, there is no official declaration about the status of the usage of Indian currency in Nepal. However, the government may take appropriate measures to ensure that currency that needs to be exchangedis done in the legal tender.
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Money to India: What you can do when you send money to India to the wrong account

When it comes to sending money to India or any other account, there are plenty of options you can consider. For one, you can always make a physical transfer, by sending funds through a bank. Otherwise, you can do it through online bank transactions. Alternatively plenty of mobile banking apps is available to make the required transfer, through a simple log in.

However, no matter the choice of medium of money transfer, there is always a risk of error when making the transfer. In the event, you make a wrong money transfer when you want to remit to India,here a few steps you can take.

• First, you need to remember the legal implementation by the Reserve Bank of India. The RBI has indicated that the transfer of funds electronically depends on the account number. In the event, you have punched in a wrong account or wallet number, which does not exist when you want to transfer money to India, you need not worry. The money will be transferred back to your account automatically. You can always contact your bank to hasten the process. Normally, it would take about a few days to a week for the money to be transferred back into your account.
  
• There are instances where you want to send money to India and have unintendedly punched in the wrong account or wallet number, but yet have the right beneficiary named. In this case, you can contact your bank and provide evidence that the transfer you made was a mistake. In this case, the bank, on your behalf will reach out to the account holder and ask for the amount to be returned. However, in this case, your bank will only function as a facilitator.
  
• Additionally, there are instances wherein you have typed in the wrong account o wallet number when you want to transfer money to India. However, the name of the unintended account belongs to a person who shares the same name. In this case, you will need to prove to the bank that the transaction made is wrong. However, like the previous case, the bank can only act as a facilitator.

In each of these cases, the funds that are deposited in the unintended account cannot be returned and given back to you. Once you have initiated the transaction to send money to India, the case is between you and the person you have transferred it to. Such situations normally become worse, if there is a combination of different banks, cities and branches.

However, to prevent such instances from occurring, here a few things you can take care of:

• Take extra effort to check whether the account number and the beneficiary names match appropriately, especially when you remit to India.
  
• Your bank may ask you to type your account number twice. If you happen to put in the wrong account number, the mismatched number will not allow you to proceed further.
  
• If you need to make a wallet transfer, ensure that the wallet you use is Payment Card Industry Data Security Standard compliant.

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