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If you are one of those people who has begun to earn your income abroad, then you must be knowing that you cannot continue with your existing bank accounts. Your income must be in a different currency and some of your expenses might be in Indian rupees. You might also expect some income in India like interest and dividend and so would like to have an account in a bank that operates out of India.  It also might be the case that the interest rate in your bank account abroad is not the greatest rate and you might be thinking of keeping some of the money earned in a bank in India to avail of better interest rates. Here are some pointers on how to do the same and we also compare different avenues of saving money earned abroad in banks.

There are three types of accounts for NRIs to operate –NRE, NRO and FCNR accounts. Many banks in India have the facility to open any of these accounts.

Let us look at the salient features of each type of account.

 

NRE Account - Non Resident External Account	This account is a bank account that can be opened using foreign currency and then the account is maintained in Indian Rupees.  It can be a savings, current on term deposit account.  It can be held as a joint account with another NRI (Non Resident Indian).  The interest earned on NRE accounts is tax free in India. The entire amount –principal and interest in fully repatriable.  The flipside to an NRE account is that it cannot be held jointly with a resident Indian and PIOs (Persons of Indian origin) cannot open an NRE account. Once you become a resident Indian, this account should be closed.
NRO Account - Non Resident Ordinary Account		The NRO account can also be opened using foreign currency and then maintained in Indian Rupees.  It can also be a current, savings or term deposit account. It can be opened by NRIs and PIOs. The entire amount –principal and interest in fully repatriable but the interest is subject to income tax.  The main advantage of an NRO account is that it can be held jointly with an Indian resident. Once you become a resident Indian, this account should be closed.

 

FCNR - Foreign Currency Non Resident Account

The FCNR account is only for term deposits. It can be maintained in certain designated foreign currencies only.  It can be opened by NRIs or PIOs. It cannot be held jointly with resident Indians. The interest and principal are tax free in India and the entire amount is fully repatriable.  An advantage that the FCNR account has over the other two accounts is that, the account can be maintained till the deposit matures even if the resident status of the person changes from NRI or PIO. Once the maturity is reached, the amount can be transferred from that account to another valid account.

 

Summary – There are different types of accounts available for Indians earning income abroad- NRE, NRO and FCNR accounts. Depending on requirements, one should choose the most convenient type of account/accounts.

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