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    Types of Bank Accounts maintained by Non-Residents

    NRI is a word which attracts the attention of the RBI, FEMA and other foreign regulations. Before going to know the various types of Accounts maintained by NRI we just have a glance at when a person will be called as Non-Resident.

     

    The word Non-Resident has been defined differently in various Acts, as far as FEMA is concerned Section 2 of the FEMA, 1999, in order to understand the definition of Non-Resident, one has to understand the definition of Resident. A person will be called as Resident if he resides in India for more than 182 days in the Previous Financial Year,

     

    1. But while computing the residence the following are not included:

     

    1. Who has gone out of India or stays outside India, in either case: a. For or on taking employment outside India
      1. For carrying on outside India business or vocation outside India, or
      2. For any other purpose, in such circumstances as would indicate his intention to stay outside India for any uncertain period

     

    1. Person who has come to or stays in India, in either case, otherwise than:

     

    1. For or on taking up employment in Indi, or
    2. For carrying on in India a business or vocation in India, or
    3. For any other purpose, in such circumstances as would indicate his intention to stay in India for any uncertain period

     

    1. Any person or Body Corporate registered or incorporated in India

     

    1. An office, branch or agency outside India owned or controlled by a person resident outside India

     

    1. An Office, branch or agency outside India owned or controlled by a person resident in India

     

    As per the Foreign Exchange Management(Deposit) Regulations, 2016 that no person Resident in India shall accept any deposit form, or make any deposit with, a person resident outside India.

     

    RBI has given few Exemptions to the above mentioned provision which are as follows:

     

    1. An authorised dealer may accept deposit from a non- resident Indian under the following schemes:

     

    • Non-Resident (External) Rupee Account Scheme (NRE Account), specified in Schedule 1

     

    • Foreign Currency (Non-Resident) Bank Account Scheme, (FCNR(B) Account) specified in Schedule-2

     

    (iii)Non-Resident (Ordinary) Rupee Account scheme specified in Schedule-3

     

     

     

     

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    1. Any person resident outside India having a business interest in India may open, hold and maintain with an authorised dealer in India, a Special Non-Resident Rupee Account (SNRR Account) specified in Schedule-4

     

    • Resident or Non-Resident acquirers may, subject to the terms and conditions specified in Schedule-5 , open, hold and maintain Escrow Account with the Authorized Dealer.

    And other few exemptions has been prescribed by RBI.

     

    Let us learn a bit deeper into the schemes formulated by RBI under which an authorized dealer can accept deposits.

     

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

     

    The Non-Resident (External) Rupee Account NR(E)RA scheme, also known as the NRE Account scheme, was introduced in 1970

     

    1.

    Eligible persons

    Non-Resident Indians (NRI’s) & Persons of Indian Origin (PIO’s),

     

     

    also called Overseas Citizens of India (OCI)

    2.

    Types of Accounts

    Savings, Current, Recurring Deposit or Fixed Deposit etc.

     

     

     

    3.

    Denominated Currency

    Indian Rupees (INR)

     

     

     

    4.

    Rate of Interest

    As prescribed by RBI from time to time

     

     

     

     

    Permitted Credits:

     

    1. Proceeds of remittances to India in any permitted currency.

     

    1. Proceeds of personal cheques drawn by the account holder on his foreign currency account and of travellers cheques, bank drafts payable in any permitted currency including instruments expressed in Indian rupees for which reimbursement will be received in foreign currency, deposited by the account holder in person during his temporary visit to India.

     

    Note:provided the authorised dealer/ bank is satisfied that the account holder is still resident outside India, the travellers' cheques/ drafts are standing/ endorsed in the name of the account holder and in the case of travellers' cheques, they were issued outside India.

     

    1. Proceeds of foreign currency/ bank notes tendered by account holder during his temporary visit to India

     

    Provided:

     

    • The amount was declared on a Currency Declaration Form (CDF), where applicable

     

    • the notes are tendered to the authorised dealer in person by the account holder himself and the authorised dealer is satisfied that account holder is a person resident outside India.

     

     

     

     

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    Types of Bank Accounts Maintained by Non-Residents

     

     

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    1. Transfers from other NRE/FCNR(B) accounts.

     

    1. Interest accrued on the funds held in the account.

     

    1. Current income in India due to the account holder, subject to the payment of applicable taxes in India

     

    1. Maturity or sale proceeds of any permissible investment in India which was originally made by debit to the account holder’s NRE/ FCNR (B) account or out of the remittances received from outside India through banking channels.

     

    1. Refund of share/ debenture subscriptions to new issues of Indian companies or portion thereof, if the amount of subscription was paid from the same account or from other NRE/ FCNR (B) account of the account holder or by remittance from outside India through banking channels.

     

    1. 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, if any (net of income tax payable thereon), provided the original payment was made out of NRE/ FCNR(B) account of the account holder or remittance from outside India through banking channels and the authorised dealer is satisfied about the genuineness of the transaction

     

    1. Any other credit if covered under general or special permission granted by Reserve Bank

     

    Permitted Debits:

     

    1. Local Disbursements

     

    1. Remittances outside India
    2. Transfer to NRE/ FCNR(B)/NRO accounts of the account holder or any other person eligible to maintain such account

     

    1. Investment in shares/ securities/ commercial paper of an Indian Company or for purchase of immovable property in India provided such investment/ purchase is covered by the regulations made, or the general permission/ special permission granted by RBI

     

    1. Any other transaction if covered under general or special permission granted by RBI.

     

    Others:

     

    Change of Residential Status:

     

    In case if the Non-Resident becomes Resident then the

     

    1. NRE account will be re-designated as resident’s account

     

    1. Funds held in the accounts may be transferred to the Resident Foreign Currency (RFC) accounts(if the person is eligible for maintaining such RFC Account)

     

     

     

     

     

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    Types of Bank Accounts Maintained by Non-Residents

     

     

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    If the account holder is only on a short visit to India, the account may continue to be treated as NRE account even during his stay in India

     

    Tax Exemption:

     

    Income form the interest on balances standing to the credit of NRE Accounts is exempt from Income Tax.

     

    Note: These accounts need to be opened by Non-Resident Account holder but not by the holder of Power of Attorney in India.

     

    Foreign Currency (Non- Resident) Account (Banks) –FCNR(B) Account:

     

    1.

    Eligible persons

    Non-Resident Indians (NRI’s) & Persons of Indian Origin (PIO’s)

     

     

    & Overseas Citizens of India (OCI)

    2.

    Types of Accounts

    Term Deposit ( Recurring Deposits are not accepted under FCNR (B)

     

     

     

    3.

    Denominated Currency

    Permitted currency as per Regulation 2(v) of FEMA 14/2000-RB

     

     

    dated May 3, 2000

     

     

     

    4.

    Rate of Interest

    As prescribed by RBI from time to time

     

     

     

     

    Introduction:

     

    • FCNR(B) scheme was introduced with effect from May 15, 1993 to replace the then prevailing FCNR(A) scheme introduced in 1975

     

    • In FCNR (A) Scheme the foreign exchange risk was borne by RBI and subsequently by the Govt. of India.

     

    • The FCNR(A) scheme was withdrawn in August, 1994 in view of its implications for the central bank’s balance sheet and quasi-fiscal costs to the Government.

     

    • The minimum maturity period of the deposit under the FCNR(B) was Six months initially, later it has been raised to 3 years and from July 26,2005 banks were allowed to accept the deposits upto a maximum maturity period of 5 Years.

     

    These accounts can be opened only with the below mentioned funds:

     

    1. Funds remitted from outside India through banking channels (Convertible Foreign Exchange)

     

    1. Funds received in rupees by debit to the account of a NRE account maintained with the Authorized dealer in India

     

    1. Funds which are repatriable nature in terms of the regulations made by RBI
    2. Transfer of Funds from existing NRE/ FCNR (B) Accounts

     

    • Earlier the deposits under FCNR(B) was permitted to be accepted only in Pound Sterling, US Dollar, Japanese Yen, EURO, Canadian Dollars & Australian Dollars. With Effect from October 19, 2011 banks were permitted to accept the FCNR(B) deposits in any permitted currency.

     

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    Types of Bank Accounts Maintained by Non-Residents

     

     

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    In case if the depositor desires to make a deposit in FCNR(B) other than the designated currency then the Authorised Dealers may undertake fully covered SWAP in that currency against the desired designated currency.

     

    Maturity of Deposit

     

    The deposits should be accepted under the Scheme for the following maturity periods

     

    • One year and above but less than Two years
      • Two years and above but less than Three years
      • Three years and above but less than Four Years
      • Four years and above but less than Five Years
      • Five Years only

     

    Permissible Debits/ Credits:

     

    All Debits/ Credits permissible in respect of NRE Accounts shall be permissible in respect of FCNR(B) Accounts.

     

    Conversion of FCNR(B) Accounts to Other Accounts& Vice-Versa

     

    RFC

     

    • The depositor can convert the amount in the FCNR(B) into RFC Account even before the maturity of the Deposit and the banks should pay interest at its discretion at the time of conversion subject to the condition that the rate of Interest should not exceed the rate payable for the deposits held under RFC Account Scheme.

     

    • Penal provisions will not apply in case of premature conversion of balances held in FCNR(B) deposits into RFC Accounts by Non- Resident Indians on their return to India

     

    NRE

    • Conversion of FCNR(B) into NRE deposits or vice-versa before the maturity is subject to the penal provisions applicable to the premature withdrawal.

     

    • Transfer of funds from existing NRE accounts to FCNR(B) accounts and vice versa, of the same account holder, is permissible without the prior approval of Reserve Bank of India.

     

    Manner of Payment of Interest:

     

    • Interest on balances held in these accounts may be paid half-yearly or on an annual basis as desired by the depositor.
    • Interest may be credited to a new FCNR (B) account or an existing/ new NRE/ NRO account in the name of the account holder, at his option.

     

    Other Points:

     

    • Repatriation of funds in foreign currencies is permitted.

     

    • The facility of Opening and maintaining FCNR(B) Accounts by Overseas Corporate Bodies which are owned directly or indirectly to the extent of at least 60 % by NRI’s and overseas trusts in which at least 60 per cent of the beneficial interest is irrevocably held by such persons (OCBs) has been withdrawn

     

    with effect from September 16, 2003.

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    Types of Bank Accounts Maintained by Non-Residents

     

     

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    Non-Resident Ordinary Rupee Account (NRO Account):

     

     

     

     

     

     

    1.

    Eligible persons

    Any Person resident outside India

     

     

     

     

     

    2.

    Types of Accounts

    Current, Savings, Recurring or Fixed Deposits

     

     

     

     

     

    3.

    Denominated Currency

    Indian Rupees

     

     

     

     

     

     

     

    Note: Opening of NRO account requires approval in the following cases:

     

    1. Individuals/ entities of Pakistan nationality/ ownership

     

    1. Entities of Bangladesh Ownership
    2. Individuals of Bangladesh Nationality may be allowed to open NRO account without the approval subject to satisfying itself that the individuals hold a valid visa and valid residential permit issued by

    FRO/ FRRO

    • Post offices in India may maintain savings bank accounts in the names of persons resident outside India subject to the same terms and conditions as are applicable to NRO accounts.

     

    Permissible Credits:

     

    • Proceeds of remittances received in any permitted currency from outside India through banking channels or any permitted currency tendered by the account-holder during his temporary visit to India or transfers from rupee accounts of Non-resident banks

     

    • Legitimate dues in India of the account holder
    • Transfers from other NRO accounts
    • Any amount received by the account holder in accordance with the rules or regulations made under the Act

     

    Permissible Debits:

     

    • All local payments in rupees including payments for investments subject to compliance with the relevant regulations made by the Reserve Bank.
    • Remittance outside India of current income in India of the account holder net of applicable taxes.
    • Transfers to other NRO accounts.
    • Settlement of charges on International Credit Cards issued by authorised dealer banks in India to NRIs or PIOs, subject to the limits for repatriation of balances held in NRO accounts specified in regulation 4(2) of Foreign Exchange Management (Remittance of Assets) Regulations, 2016

     

    Note:

     

    • Balances in NRO accounts are eligible for remittance outside India only with the general or specific approval of RBI .

     

    • Funds received by the way of remittance from outside India in Foreign Exchange which have not lost their identity as remittable funds will only be considered by RBI for remittance outside India.

     

     

     

     

     

     

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    Types of Bank Accounts Maintained by Non-Residents

     

     

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    • An account being opened by a foreign tourist visiting India, with funds remitted from outside India in a specified manner or by sale of foreign exchange brought by him to India, authorised dealers may convert the balance in the account at the time of his departure to the Foreign Currency for payment to the account holder provided that the account has maintained for a period not exceeding 6 months and the account has not been credited with any local funds apart from the interest accrued thereon.

     

    Change in Residential Status:

     

    • If any Non-Resident having NRO account return to India for taking up the employment, or for carrying on business or vocation or for any other purpose indicating his intention stay in India for an uncertain period then the NRO account will be designated as resident rupee account.

     

    • Where the account holder is only on a temporary visit to India, the account should continue to be treated as non-resident during such visit.

     

    If any resident person leaves India for any country (other than Nepal or Bhutan) for taking up employment or for carrying on business or vocation or for any other purpose indicating his intention stay in India for an uncertain period then his existing account could be designated as a Non-Resident Ordinary Account (NRO)

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