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BANK ACCOUNTS
TYPES OF NONRESIDENT BANK ACCOUNTS
Bank Accounts of nonresidents may be classified on the basis of:
Repatriation facility and Currency of account
On the basis of repatriation facility, there shall be two types of accounts namely
ordinary accounts without any repatriation facilities and external accounts will full
repatriation right. On the basis of currency of account, nonresidents can maintain their
accounts either in Indian rupees or in designated foreign currencies.
The nonrepatriable account is the Non Resident Ordinary Account (NRO),though the interest
is repatriable after the correct tax is paid thereon.
The NRI related accounts with repatriation rights that can be maintained in India are
a) Non Resident External Rupee Account (NRE) maintained in Indian rupees
b) Foreign Currency NonResident Account (FCNR) maintained in foreign currencies
c) Resident Foreign Currency Account
NonRepatriable Accounts
Ordinary NRO Accounts in Rupees
It is mandatory for a person to get all his bank accounts redesignate as NRO accounts
within a reasonable limit when he becomes an NRI. Many ignore this requirement. Fresh
accounts may be opened with authorised dealers or some designated post offices in India
when the person is in India on holidays or short tour. The account can be freely operated
by the account holder or the joint holder (who can be a resident) for bonafide
transactions. The corpus in this account is understandably non repatriable but the
interest thereon is, only after correct tax thereon is paid or arranged to be paid.
When the individual once again becomes a Resident in India, NRO accounts should be
redesignated as resident rupee accounts.
Opening of an account
1. Any person resident outside India may open NRO account with an authorised dealer or an
authorised bank for the purpose of putting through bona fide transactions in rupees
without violating any of the provisions of the Act,rules and regulation made thereunder.
2. The operations on the accounts should not result in the account holder making available
exchange to any person resident in India against reimbursement in rupees or in any other
manner.
3. At the time of the opening of the account, the account holder should furnish an
undertaking to the authorised dealer/authorised bank with whom the account is maintained
that in the case of debits to the account for the purpose of investment in India and
credits representing sale proceeds of investments, he will ensure that such
investments/disinvestments will be in
accordance with the regulation made by Reserve Bank in this regard.
NOTES
Opening of account by individuals/entities of Bangladesh/Pakistan nationality/ownership
requires approval of Reserve Bank.
Post offices in India may maintain saving bank accounts in the names of persons resident
outside India and allow operations on these accounts subject to the same terms and
conditions as are applicable to NRO accounts maintained with an authorised
dealer/authorised bank.
Join Accounts with Residents
The account may be held jointly with residents.
Types of Accounts
NRO account may be opened/maintained in the form of current, savings, recurring or fixed
deposit accounts. The requirements laid down in the directives issued by Reserve Bank in
regard to resident accounts shall apply to NRO accounts as well.
Operation of Accounts
A resident power of attorney (POA) holder can operate the NRO Account on behalf of the
nonresident account holder. Regulations governing NRE account scheme specifically prohibit
the resident POA holder from repatriation outside India of funds held in NRE account or
make payment by way of gift to a resident on behalf of the account holder. There is no
such specific
prohibition in case of NRO account scheme; however, it is advisable to approach RBI for
the guidance in the matter. There are not many restrictions on operations of these
accounts and the undernoted debit and credit transactions are allowed in these accounts.
(A) Credits
(i) Proceeds of remittances received in any permitted currency
from outside India through normal banking channels or any permitted currency tendered by
the accountholder during his temporary visit to India or transfers from rupee accounts of
nonresident banks.
(ii) Legitimate dues in India of the account holder.
(iii) Maturity proceeds of their term deposit held under NRSR
Accounts
Scheme may be credited to NRO account.
(B) Debits
(i) All local payments in rupees including payments for
investments subject to compliance with the relevant regulations made by the Reserve Bank
in this behalf.
(ii) Remittance outside India of current income in India of the
account holder net of applicable taxes.
Remittance of funds held in NRO accounts
Balances in NRO accounts are not eligible for remittance outside India without approval of
Reserve Bank. Funds received by way of remittances from outside India in foreign exchange
which have not lost their identity as remittable funds will only be considered by Reserve
Bank for remittance outside India.
(I) Remittance of assets by NRI/PIO
NRls/PIOs are permitted to remit through an Authorised Dealer, an amount not exceeding USD
One million per calendar year, out of balances held in the NRO account representing the
sale proceeds of assets (a) acquired in India out of rupee/foreign currency funds or (b)
by way of inheritance/legacy or settlement from a person who was resident in India
subject to conditions outlined below:
(a) Assets acquired in India out of rupee/foreign currency funds
(i) Immovable property
NRI/PIO may remit sale proceeds of immovable property purchased by him as a resident or
out of rupee funds as NRI/PIO provided such a property was held by him for a period of not
less than ten years. If such a property is sold after being held for less than ten years,
remittance can be made, if the sale proceeds were held for the balance period in NRO
account (Savings/Term Deposit) or in any other eligible investment to the satisfaction of
authorised dealer.
(ii) Other financial assets
For remittance of sale proceeds of financial assets, there is no lockinperiod.
(b) Assets acquired by way of inheritance/legacy or settlement
For remittance of sale proceeds of assets, both financial and immovable property acquired
by way of inheritane'e/legacy or settlement from a person who was resident in India there
is no lockinperiod. NRI/PIO may submit to the satisfaction of Authorised Dealer
documentary evidence in support of inheritance/legacy or settlement.
(II) Remittance of assets out of NRO account by a person resident
outside India other than NRI/PIO
A citizen of a foreign state not being a citizen of Pakistan, Bangladesh, Nepal or Bhutan
who
(i) has retired from an employment in India, or (ii) has inherited assets from a person
who was resident in India, or (iii) is a widow resident outside India and has inherited
assets of her
deceased husband who was an Indian citizen resident in India.
may remit an amount up to USD One million, per calendar year, on production of documentary
evidence in support of acquisition, inheritance or legacy of assets to the authorised
dealer.
(III) Restrictions
The facility of remittance of sale proceeds of immovable property to a citizen of
Pakistan, Bangladesh, Sri Lanka, China, Afghanistan, Iran, Nepal and Bhutan is not
available. The facility of remittance of sale proceeds of other financial assets is not
available to a citizen of Pakistan, Bangladesh, Nepal and Bhutan.
Change of Residential Status
(i) Bank Account
(a) From Resident to Nonresident
When a person resident in India leaves India for a country (other than Nepal or Bhutan)
for taking up employment, or for carrying on business or vocation outside India or for any
other purpose indicating his intention to stay outside India for an uncertain period, his
existing account should be designated as a NonResident (Ordinary) account.
(b) From Nonresident to Resident
NRO accounts may be redesignated as resident rupee accounts on return of the account
holder to India for taking up employment, or for carrying on business or vocation or for
any other purpose indicating his intention to stay in India for an uncertain period. Where
the account holder is only on a temporary visit to India, the account should continue to
be treated as nonresident during such visit.
(ii) Loans/Overdrafts
In case of person who had availed of loan or overdraft facilities while resident in India
and who subsequently becomes a person resident outside India, the authorised dealer may at
his discretion and commercial judgement,allow continuance of the loan/overdraft
facilities. In such cases, payment of interest and repayment of loan may be made by inward
remittance or out of
legitimate resources in India of the person concerned.
Payment of funds to Nonresident Nominee
The amount due/payable to nonresident nominee from the account of a deceased account
holder, shall be credited to NRO account of the nominee with an authorised dealer/
authorised bank in India.
Foreign Nationals of nonIndian origin on a visit to India
NRO account (current/savings) can be opened by a foreign national of nonIndian origin
visiting India, with funds remitted from outside India through banking channel or by sale
of foreign exchange brought by him to India. The balance in the NRO account may be
converted by the authorized dealer into foreign currency for payment to the account holder
at the time
of his departure from India provided the account has been maintained for a period not
exceeding six months and the account has not been credited with any local funds, other
than interest accrued thereon.
REPATRIABLE ACCOUNTS
Non Resident (External) Rupee Account (NRE Accounts)
NRIs and PIOs, are eligible to open NRE Accounts. These are rupee denominated accounts.
Accounts can be in the in the form of savings, current, recurring or fixed deposit
accounts. Accounts can be opened by remittance of funds in free foreign exchange. Foreign
exchange brought in legally, repatriable incomes of the account holder, etc. can be
credited to
the account. Joint operation with other NRIs/PIOs is permitted. Power of attorney can be
granted to residents for operation of accounts for limited purposes.
The deposits can be used for all legitimate purposes. The balance in the account is freely
repatriable. Interest is lying to the credit of NRE accounts is exempt from tax in the
hands of the NRI.
Funds held in NRE accounts may be freely transferred to Foreign Currency Non Residents
(FCNR) accounts of the same account holder. Likewise, funds held in FCNR accounts may be
transferred to NRE accounts of the same account
holders.
Opening of An Account
Persons of Indian nationality or origin resident abroad may open, with authorised
banks in India, Nonresident (External) Accounts (NRE Accounts), designated in rupees.
These accounts can be maintained in the form of savings, current or term deposit accounts.
Opening of NRE Accounts jointly in the names of two or more nonresidents is permitted
provided all the
account holders are persons of Indian nationality or origin. For opening these accounts,
the funds are required to be remitted to India through any bank from the country of
residence of the prospective account holder.
The account holder has to furnish an undertaking on the account opening form that he would
promptly send intimation to his bank if and when he returns to India for permanent
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