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As the Indian rupee is susceptible to adverse fluctuations against foreign currencies, it is advisable to hold deposits in FCNR accounts. However, this will depend on whether funds could be kept for a fixed term. Furthermore, as a measure of planning, it may be prudent to maintain FCNR accounts in the currency which is stronger not only in relation to the Indian rupee but also in relation to other currencies in international markets. For example, if the Deutsche Mark is becoming stronger in relation to the dollar, it may be advisable to maintain the account in Deutsche Marks.
Repatriability being a very important consideration from the point of view of the non-resident, it may be preferable to remit funds into the FCNR / NRE account rather than the NRO account.
NRIs might do well to keep part of their funds in India, so that an appropriate fall back arrangement is available, in case they have to return back to their homeland.
It may be advisable to deal with a bank branch which is directly authorised to open non-resident accounts, than to deal with a bank branch which in turn deals through another authorised dealer.
Tax
being a crucial factor, all commercial transactions must be taken into
consideration while remitting funds into India. For example, interest accrued
on NRO accounts is liable to Indian taxation, while interest accruing on
NRE accounts is exempt from tax.
Chart
summarising salient features of bank accounts relevant to NRIs
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| 1. NRE Rupee Account | Foreign remitance | Yes | Rupees | 1.
Joint a/c permitted with another NRI.
2. Indian resident can operate under power of attorney, for local payments |
| 2. FCNR Account / FCNR (Banks) Scheme Account | Any of the four specified foreign currencies viz, US Dollar, Pounds Sterling, Deutsche Mark, Yen | Yes | Relevant currency in which account is opened | Can be opened only in form of fixed deposit account. |
| 3.
NRO Rupee
Account |
Rupee | No | Rupees | When a resident Indian becomes an NRI, his bank account is designated as NRO account. It can also be opened later either out of foreign remittance, or local (Indian) funds. |
| 4.
FCNR (NR)
Account |
Foreign remittance | No | Rupee (but till maturity, it is designated in US $ and interest is compounded accordingly) | Account
is kept deno-minated in US dollars.
Interest is also calculated in US dollars. Accordingly, the holder is protected against fall in the value of the rupee. |
| 5.Non-resident (Non-repatriable) Rupee Deposit Account | Foreign remittance, but account maintained in rupees | No | Rupees | 1.
This scheme is also open to persons of non-Indian origin and OCBs controlled
by them.
2. Maturity period can be fixed between 6 months and 3 years. |
(1) Interest on all the above accounts, except NRO accounts are free of income tax; the balances in all
accounts are free of wealth tax.
(2) All the above accounts can be opened by both NRIs as well as OCBs.
(3) RFC accounts are basically for returning NRIs i.e. returned to India for settlement, and hence not
considered
in above chart.
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