Non-Resident Accounts
These can be opened by Non-Resident Indians and Overseas Corporate Bodies with any bank in India that has an Authorised Dealer license.
Foreign Currency Non-Resident Account (FCNR)
These are maintained in the form of fixed deposits for 1 year to 3 years. Since the
account is designated in foreign currency (Pounds, Sterling, US Dollars, Japanese Yen
and Euro), the account holder does not incur exchange losses in first converting foreign
currency into rupees (while depositing the money) – and then re-converting the rupees
into foreign currency (when he wants to take the money back).
The depositer will have to bring in money into the account through a remittance from
abroad or through a transfer from another FCNR / NRE account. If the money is not in
the designated foreign currency, then he will have to bear the cost of conversion into
the designated currency. On maturity, he can freely repatriate the principal and interest
(which he will receive in the designated currency that he can convert into any other
currency, at his cost). Interest earned on these deposits is exempt from tax in India.
Non-Resident External Rupee Account (NRE)
As in the case of FCNR,
o The money has to come through a remittance from abroad, or a transfer from another
FCNR / NRE account.
o The principal and interest are freely repatriable.
o Interest earned is exempt from tax in India.
The differences are:
o It can be operated with a cheque, as in the case of any savings bank account.
o It is maintained in rupees. Therefore, a depositer bringing money in another currency
will have to first convert them into rupees; and then re-convert them to the currency
in which he wants to take the money out.
If during the deposit period, the rupee becomes weaker, then that loss is to the
account of the depositer.
Non-Resident Ordinary Account (NRO)
As with a NRE account,
o It can be operated with a cheque, as in the case of any savings bank account.
o It is maintained in rupees with the resulting implications in terms of currency
conversion losses for the depositer.
The differences from NRE are:
o The money can come from local sources – not necessarily a foreign remittance or
FCNR / NRE account.
o The principal amount is not repatriable, though the interest can be repatriated.
o The bank will deduct tax at source, on the interest earned in the deposit.
o A non-resident can open an NRO account jointly with a resident.
