November 2021
India provides a host of investment opportunities that attracts Non-residents globally. Investing in the various avenues is permitted through normal banking channels and therefore, a valid bank account becomes absolutely essential. Each bank account type has different characteristics, purposes for which it can be used, different operational guidelines, repairability facilities etc. Therefore, based on objectives and needs, Non-Residents should be aware of the type of account they wish to hold in India. The following types of accounts are generally opened by Non-residents in India:
Non-Resident Ordinary Rupee (NRO) Account
Certain important definitions for terms referred in the note are as follows:
a) Who was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 or
b) Who belonged to a territory that became part of India after the 15th day of August, 1947 or
c) Who is a child or a grandchild or a great-grandchild of a citizen of India or of a person referred to in clause (a) or (b) or
d) Who is a spouse of foreign origin of a citizen of India or spouse of foreign origin of a person referred to in clause (a) or (b) or (c)
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NRO A/c
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NRE A/c and FCNR(B) A/c |
SNRR A/c |
Brief |
It an INR account held by Non-residents for making investments on a non-repatriation basis. |
NRE is an INR account that is freely repatriable whereas FCNR are term deposits that can be held in foreign currency |
SNRR is a special type of INR account for Non-residents with business interest for a limited period |
Eligible Person |
Any non-resident subject to conditions prescribed. |
NRIs and PIOs |
Any non-resident, having a business interest in India for the purpose of bonafide transactions. |
Type of account |
Savings, current, recurring or fixed deposit. |
Savings, current, recurring or fixed deposit However, FCNR(B) A/c can be maintained in the form of fixed deposits only. |
The tenure of the account shall be concurrent to the tenure of the contract/period of business of the account holder and in no case shall exceed 7 years except for certain specified purposes this restriction of 7 years shall not apply. RBI Approval to be obtained for renewal. |
Joint Account |
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Permissible credits |
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Permissible Debits |
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Rate of Interest |
As per the guidelines issued by the RBI from time to time |
No interest |
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Taxation |
Interest is taxable |
Interest is exempt from Income tax. |
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Change in residential status of Account-holder |
From Resident to Non-Resident – Existing resident account will be designated as NRO A/c From Non-Resident to Resident – NRO A/c will be designated as Resident Rupee A/c.
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NRE A/c: NRE A/c should be re-designated as resident A/c or the funds can be transferred into RFC A/c, at the option of holder immediately on becoming a resident of India. Where the holder is only on a short visit to India, the account can continue as NRE A/c even during his stay in India. FCNR(B) A/c: When an account holder becomes a person resident of India, deposits may be allowed to continue till maturity at the contracted rate of interest. However, except the provisions relating to rate of interest and reserve requirements as applicable, for all other purposes such deposits shall be treated as resident deposits from the date of return of the account holder to India. AD Banks should convert FCNR(B) deposits on maturity into rupee account or RFC A/cat the option of the account holder. |
SNRR A/c may be designated as resident rupee account on the accountholder becoming a resident.
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Loans against Deposit |
To Accountholders Loan can be used for:
To Third parties Loans to resident individuals/ firms/ companies in India may be granted against the security of deposits held in NRO A/c, subject to the following terms and conditions
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To Accountholders Loan can be used for:
Repayment shall be made either by adjustment of the deposit or by fresh inward remittances from outside India through banking channels or out of NRO A/c of the borrower.
To Third parties: Loans to resident individuals/ firms/ companies in India may be granted against the collateral of fixed deposits held in NRE/FCNR (B) A/c subject to the following conditions:
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Loans outside India |
Not Permitted |
AD Banks may allow their branches outside India to grant loans to the non-resident depositors or to third parties at the request of depositor for bonafide purposes except for the purpose of relending or carrying on agricultural/plantation activities or for investment in real estate business, against the security of funds held in the NRE/FCNR (B)A/c in India |
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Power of Attorney (POA) |
AD banks may allow resident POA holder appointed by Non-resident to operate NRO A/c for:
Note: Resident POA holder cannot repatriate outside India funds held in NRO A/c other than to non-resident accountholder himself nor can make payment by way of gift to a resident on behalf of the non-resident account holder nor transfer funds to another NRO A/c. |
AD Banks may allow resident POA holder appointed to operate NRE A/c for local payments or remittance to the account holder himself through banking channels.
Note: In cases where the account holder or a bank designated by him is eligible to make investments in India, the POA holder may be permitted to operate the account to facilitate such investment.
Resident POA holder cannot repatriate outside India funds held in the account other than to the account holder himself, nor can make payment by way of gift to a resident on behalf of the account holder nor transfer funds from the account to any NRE A/c. |
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Payment to/ by Nominees |
Amount due to non-resident nominee of a deceased account holder, shall be credited to NRO A/c of the nominee in India. |
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Amount due to non-resident nominee of a deceased accountholder, shall be credited to NRO/NRE account of the nominee in India or by remittance through normal banking channels. |