TYPES OF NRI ACCOUNTS IN BANKS .

Under the Foreign Exchange Management Act

(FEMA) of 1999, Non Resident Indians (NRIs) and
Persons of Indian Origin (PIOs) can open and
maintain three types of accounts namely

1) Non-Resident Ordinary Rupee Account (NRO Account)

2) Non-Resident (External) Rupee Account (NRE

Account) 

3) Foreign Currency Non Resident (Bank)

1. NRE (Non-Resident External Account)
NRE is one of the many types of NRI bank accounts. NRIs use it to transfer
foreign earnings to India. With this account, you can deposit money in a
foreign currency and freely repatriate back to your country of residence.
Once the money is deposited in foreign currency, it’s converted into INR.
You can subsequently maintain and withdraw funds in INR. An NRE
account is available in the form of savings or fixed deposits.
Some of the key benefits of having an NRE account are -
Tax Benefits - The amount which is deposited or credited in this account is
exempt from tax in India. The interest earned is also not taxable in India.
Repatriation Benefits – You can quickly and easily transfer funds from your
NRE savings account back to your country of residence or transfer foreign
earnings to the account. There are no restrictions on the repatriation of funds
using the NRE account back to your country of residence.
2. NRO (Non-Resident Ordinary
Account)

An NRO account is also an Indian rupee-denominated account and is

available as a savings account and a fixed deposit. However, while an
NRE account is used to keep money earned overseas, an NRO account
is for managing the income you earn in India. This income can be
through sources like rent (from a property you own in India), dividends,
salaries, etc. You can repatriate up to USD 1 million in any financial
year through an NRO account. You do need to note that this account's
interest is taxable in India according to the Income Tax Act of India.

Some of the key benefits of having an NRO account are -

Easily manage India earnings and expenses: An NRO account is ideal

for managing your local earnings and expenses.
Joint Holding: You can open a joint NRO account with an NRI and a
resident Indian. However, the NRI can only choose a resident close
relative as a joint account holder on a former or survivor basis
3. FCNR (Foreign Currency Non-Resident Account)

FCNR is a fixed deposit account opened by an NRI to transfer their foreign income in
the same currency. Fundamentally, it differs from NRE and NRO in terms of the
underlying currency denomination. NRIs can deposit funds in 7 currencies - US Dollars,
UK Pound, Singapore Dollar, Hong Kong Dollar, Canadian Dollar, Australian Dollar
and Swiss Franc. There are no restrictions on repatriation from an FCNR account. It is
an investment option for NRIs looking to retain their income in foreign currency for
better returns.

Some of the key benefits of having an FCNR account are –

Low risk– NRIs have to maintain an FCNR account in a foreign currency. Through this
account, NRIs can reduce the risk of losses due to currency fluctuations.
Tax-Free – Neither the principal amount deposited nor its interest is taxable in India
under the Indian Income Tax Act 1961.

Final Note: Some NRIs often face difficulties with bifurcated earnings across India and
abroad. It is challenging to manage finances spread across multiple accounts and keep
track. NRI accounts help mitigate such challenges while also complying with the Indian
laws. However, NRIs need to understand the various types of NRI accounts and their
benefits to choose the best alternative.
DIFFERENCE
BETWEEN NRE
ACCOUNT AND
NRO ACCOUNT
Basic NRE Account NRO Account
Acronym Non Resident External Non Resident Ordinary
Account Account
Meaning It is an account of an NRI It is an account of an NRI
to transfer foreign earnings to manage the income
to India earned in India
Taxability Interest earned is tax free Interest earned is taxable
Repatriability Can repatriate Can repatriate the interest
amount, the principle
amount can be repatriated
within the set limits
Joint Account Can be opened by two Can be opened by an NRI
NRIs along with an Indian
citizen or another NRI
Deposits and Can deposit in foreign Can deposit in foreign as
Withdrawals currency, and withdraw in well as Indian currency,
Indian currency and withdraw in Indian
currency
Exchange Rate Prone to risk Not prone to risk