Dear Readers,
I hope you are doing well!
In this article, I have given brief note on the various bank accounts which can be used by Non Resident Indians / returning Indians.
Hope you will find this useful.
Warm regards,
Samir Mahajan
BACKGROUND:
In today’s globalized economy, many Indians engage in cross-border employment, investments, and business activities. The Foreign Exchange Management Act, 1999 (FEMA) provides a legal framework for managing foreign exchange transactions. FEMA allows specialized bank accounts for NRIs, PIOs, foreign entities, and returning residents. This note gives features of five key FEMA-compliant accounts: NRE, NRO, FCNR(B), SNRR, and RFC.
1. Non-Resident External (NRE) Account:
An NRE account allows NRIs to deposit their foreign earnings in Indian banks, denominated in Indian Rupees. The funds remitted from abroad are converted to INR at prevailing exchange rates and can be held as Savings, Current, Recurring, or Fixed Deposit.
Features of NRE Account
- For NRIs/PIOs to deposit foreign earnings in INR.
- Savings/Current/Fixed/Recurring formats.
- Funds fully repatriable (principal + interest).
- Interest exempt from tax in India.
- Joint holding only with NRIs/PIOs.
2. Non-Resident Ordinary (NRO) Account:
NRO accounts are structured to manage income arising in India—such as rent, dividends, pensions, or other domestic sources. These accounts accept deposits in both INR and foreign currency but operate solely in INR for all withdrawals. They can be held jointly with other NRIs or resident Indians (on a “former or survivor” basis). Unlike NRE accounts, repatriation is restricted to USD 1 million per financial year (post-tax compliance). Interest earned is taxable and subject to TDS.
Features of Non- Resident Ordinary Account
- For managing Indian income (rent, dividends, pension, etc.)
- Deposits in INR/foreign currency, operated in INR.
- Repatriation allowed up to USD 1 million/year (post-tax).
- Interest taxable in India (TDS applies).
- Joint holding allowed with NRIs and residents.
3. Foreign Currency Non-Resident (Bank) [FCNR(B)] Account:
FCNR(B) accounts are fixed deposit accounts held in foreign currency by NRIs who want to safeguard their deposits against INR depreciation. These accounts accept deposits in freely convertible currencies such as USD, GBP, EUR, JPY, AUD, and CAD, with terms ranging from 1 to 5 years. The account protects against currency risk, with both interest and principal fully repatriable and tax-free in India. Deposits can be made via foreign remittances or transfers from existing NRE accounts.
Features of Foreign Currency Non Resident Account
- Fixed deposit account in foreign currency (USD, GBP, EUR, etc.).
- Tenure: 1–5 years.
- Fully repatriable (principal + interest).
- No exchange risk, interest tax-free.
- Joint holding with NRIs/PIOs allowed.
4. Special Non-Resident Rupee (SNRR) Account:
The SNRR account is intended for non-residents engaged in permitted business or contractual transactions in India, who do not qualify for NRE/NRO/FCNR accounts. It is a Rupee-denominated, typically non-interest-bearing account unless specifically permitted by the RBI. Used primarily for trade, investments, ECB inflows, or business transactions, these accounts are temporary and must be closed once the underlying transaction ends. Repatriation is allowed in line with the permitted transaction.
Features of Special Non- Resident Rupee Account
- For non-residents with permitted business/contractual dealings in India.
- INR-denominated, usually non-interest bearing.
- Valid for duration of contract (max. 7 years).
- Repatriation as per underlying transaction and RBI rules.
5. Resident Foreign Currency (RFC) Account:
This account enables to the returning NRIs/PIOs to retain their foreign income in foreign currency after returning to India for permanent residence (post 1 year of overseas stay). These accounts can hold balances in USD, GBP, EUR and other freely convertible currencies. RFCs are available as Savings or Fixed Deposit or Term deposit accounts and support repatriation for genuine purposes such as foreign travel or overseas education. They may also receive balances from NRE/FCNR accounts post-residency status change.
Features of Resident Foreign Currency Account
- For returning NRIs/PIOs to retain foreign income in foreign currency.
- Can hold USD, GBP, EUR, etc.
- Available as Savings or Fixed/Term deposits.
- Freely repatriable for purposes like travel or education.
- Can receive balances from NRE/FCNR after residency change.
CONCLUSION: Choosing the right account under FEMA depends on your residential status, income source, and repatriation needs. While NRE and FCNR(B) accounts benefit those with income abroad, NRO accounts are suited for managing Indian income. SNRR and RFC accounts cater to specific cases involving foreign businesses or returning residents. Understanding these account types ensures legal compliance, financial planning, and smooth international banking. Always consult a FEMA expert or banker to determine the most appropriate structure based on your unique circumstances.
