Overview

An important step towards liberalisation of foreign exchange facilities available to individual residents was, the permission by Reserve Bank of India to allow a resident in India to open, hold and maintain with a licensed Bank (which is also an authorised dealer) in India, a Foreign Currency (Domestic) Account and foreign exchange acquired from any of the sources specified as under can be kept in this account by the resident.

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NRE Account

Non-Resident External (NRE) Accounts for NRIs / PIOs
Who can open NRE Accounts?
  • Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs) are permitted to open these accounts with ADs. (RBI approval required for Bangladesh/ Pakistan individuals)
Types of Accounts NRE accounts can be of following types: Current, Savings, Recurring, and Fixed Deposit.
Permitted Credits
  • Remittances to India in any permitted currency.
  • Deposited by the account holder in person on temporary visit to India:
    • Personal Cheques drawn on the account holder’s foreign currency account
    • Travellers cheques issued outside India
    • Bank drafts payable in any permitted currency
    • Instruments in Indian Rupees which are reimbursed in foreign currency
    • FCY Notes / Bank Notes
  • Subject to,
    • the amount was declared on a Currency Declaration form (CDF) where applicable,
    • AD is satisfied that the account holder is a person residing outside India.
  • Transfers from other NRE / FCNR (B) accounts
  • Interest accruing on the funds held in account
  • Cheques issued by AD category I/II entities supported with encashment certificate towards encashment of foreign currency by NRI with them.
  • Current income in India, subject to payment of applicable taxes in India.
  • Following receipts for assets acquired by debit to the NRE/ FCNR account of the account holder:
    • Maturity of sale proceeds of any permissible investment in India
    • Refund of share / debenture subscriptions to new issues of Indian companies or portion thereof
    • Refund of application / earnest money/ purchase consideration made by the house building agencies / Seller on account of non-allotment of flat / plot / cancellation of bookings / deals for purchase of residential / commercial property together with interest
    • Any other credit, if covered under general or special Permission granted by Reserve Bank
Permissible Debits
  • Local disbursements
  • Remittances outside India
  • Transfer to NRE / FCNR (B) accounts of account holder or any eligible person
  • Investment in shares / securities / commercial paper of an Indian company
  • Purchase of immovable property in India, provided the same is covered by Regulations/ general or special permission by RBI
  • Any other transaction as permitted by RBI
Change of Status to Resident
  • When an NRE account holder returns to India with intention to stay for an uncertain period (for employment/ business/ vocation/  any  other purpose):
    • Accounts should be Re-designated as resident account, or
    • Funds may be transferred to the Resident Foreign Currency (RFC) (if eligible for maintaining RFC a/c)
Joint Accounts
  • Permitted to be opened in below cases:
    • In the names of two or more NRIs or PIOs.
    • With resident relative(s), as second holder, (eligible to operate as POA holder) on “former or survivor basis”
Operations by Power of Attorney (POA)
  • POA in favour of a resident permitted for:
    • Making all local payments
    • Remittance to the account holder abroad
    • Investment in India
  • POA not permitted for:
    • Repatriation outside India other than to account holder
    • Gift to a resident
    • Transfer to another NRE account
Tax Exemption 
  • Interest on NRE deposits not taxable
  • NRE deposits are exempted from wealth tax

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NRO Account

Non-Resident Ordinary (NRO) Accounts for NRIs / PIOs
Who can open NRO Accounts?
  • Any person residing outside India for the purpose of putting through bona fide transactions in rupees
  • Individuals/ entities of Pakistan nationality/ origin and entities of Bangladesh origin require the prior approval of the Reserve Bank of India
Types of Accounts
  • Current, Savings, Recurring, and Fixed Deposit
Currency
  • Indian Rupees
Joint Accounts
  • NRIs and/or PIOs jointly with other NRIs and/or PIO
  • With residents as second holder on “Former or Survivor” basis only.
Permitted Credits
  • Remittances to India in any permitted currency through banking channels
  • Any permitted currency deposited by account holder during his visit to India
  • Transfers from rupee accounts of non-resident banks
  • Legitimate dues in India of the account holder
  • Transfers from other NRO accounts
  • Rupee gift/ loan made by a resident to a NRI/ PIO relative within the LRS limits
Permitted Debits
  • Local payments in rupees including payments for investments subject to regulations
  • Remittances outside India of current income of account holder in India net of taxes
  • Transfers to other NRO accounts
  • Up to USD 1 Million USD in a FY for permissible purpose (For NRIs/PIOs)
Operations by Power of Attorney (POA)
  • POA in favour of a resident permitted for:
    • Making all local payments
    • Remittance outside India to the account holder of his Indian current income net of taxes
    • Investment in India subject to conditions
  • POA not permitted to:
    • Repatriation outside India other than account holder
    • Gift to a resident
    • Transfer to another NRO account
Change of Resident Status
  • Resident to Non-resident - When a resident account holder leaves India for a country (Except Nepal or Bhutan) for employment / business / vocation or for an uncertain period his existing resident account to be redesignated as NRO Account
  • Non-resident to Resident - On return of the NRO account holder to India for employment / business / vocation or for an uncertain period his NRO account to be redesignated as resident rupee account
Payment of funds to Nominee
  • Amount payable to Non-resident nominee from the account of deceased to be credited to NRO account of nominee

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