Understanding NRI Bank Accounts

Most individuals make a mistake of continuing a resident savings account even after becoming a NRI but the law does not allow it. Or in simple words it’s illegal to hold savings bank account for NRIs.
As per FEMA regulation, when a status changes to NRI the resident savings account have to be converted to a Non-Resident account.

Types of NRI bank accounts

An NRI can choose from two options : an NRE or an NRO account. It would be advantageous to know how these two types of accounts differ and which one is right for you.

What is an NRE account?

  • A Non-Resident External (NRE) account is a bank account that is opened by depositing ‘External’ (foreign) currency at the time of opening a bank account.
  • In an NRE account, you can keep your funds in rupee denomination.
  • With this account, the principal and interest earned are fully repatriated. Simply put, it will allow you to transfer funds from India to foreign country seamlessly.
  • Such accounts can be jointly held with NRIs.
  • You are allowed to make nominations as well.
  • The interest that you earn is exempt from tax, that is it’s tax- free.

What is an NRO account?

  • A Non-Resident Ordinary (NRO) account is the normal bank account opened by an Indian going abroad with the intention of becoming an NRI.
  • You can keep your funds in rupee denomination here as well.
  • Unlike an NRE account, with an NRO account your repatriation is allowed only under specific conditions. As the RBI’s guidelines you are permitted to repatriate only up to $1 million per financial year (April to March) for purposes like education, medical expenses and current income.
  • As per the RBI, you can hold an NRO account jointly with residents or non-resident Indians.
  • You are allowed to make nominations on the account as well.
  • The interest you earn is taxable as per Indian income tax laws.

Which account should you choose?

Choose NRE account if you:

  • want to park your overseas earnings remitted to India
  • want to maintain savings in Rupee but keep them liquid
  • want to make a joint account with another NRI
  • want Rupee savings to be freely repatriable

Choose NRO account if you:

  • want to park India based earnings in Rupees in India
  • want account to deposit income earned  in India such as rent, dividends etc.
  • want to open joint account with resident Indian (close relative)

All income which is receivable in India such as rentals from property, investments, pension etc has to be deposited in NRO account.
Any payment towards insurance premiums or EMIs on loans which you availed while in India also has to be mandated from NRE/NRO account.
Any investment you make in India can be funded from NRE/NRO account.
Both accounts can be opened as Savings as well as Current accounts and are Indian Rupee accounts.
– Aneesh V / NRICafe.com

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23 thoughts on “Understanding NRI Bank Accounts”

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  1. Dear Sir,
    I am an Indian, migrated to Canada and now holding the Canadian citizenship. I have NRI accounts in India and using it for transactions.
    May i know that is it legal to hold and deposit money in India/Indian bank while i am a Canadian Citizen?

  2. Dear sir
    i am working in Dubai. i have opened a NRE Account this month. i already have bank account in UAE. What is the limitation of Fund transfer to UAE Account to NRE Account ?>

  3. i have a question. I have NRE account. I want to add my wife’s name in NRE account as resident. Is it possible?

  4. Subramanian Vasudevan

    I am a new NRi aged 79 years. I have no income in US. I had opened a FD when I was a Resident in ICICI Bank and the bank has given me the Senior Citizen benefit. This FD is to mature in Dec 2017. To comply with law, I had converted my account to NRO. This change was made in Aug 2017-just four months before maturity of FD. Now ICICI Bank says that the senior Citizen benefit is not applicable retrospectively from Dec 2014 & had deducted. what ever additional paid till June 2017 (for 2 yrs & 6 months out of 3 yrs)). Is there any guidelines by RBI that the additional benefit for Senior Citizen will not be payable if the FD is changed from Resident to NRO in the intervening period of currency of thye FD? If some learned friends can advice, I would be grateful. ICICI Bank is not telling whether there is any approved rules or is it only discretionary?

  5. I have both NRE and local saving accounts. Local account is being used for rental deposits and local transactions.
    Is it acceptable having two different accounts?? Pls advise.
    thank you.

  6. shirish c mistry


  7. sir, I am working in Qatar from last 5 year, just I want to know what is the definition of NRI ? its only related with if we outside india more than 182 days means we consider as a NRI, but in my case I have income source here, but my family is staying with me, my wife is only house wife, no income source, so she also consider as a NRI. she also need to open NRE account in india ? she cannot keep normal saving account?

  8. Sadhu Singh Samra

    Specified RBI Banks are very faraway from Punjab to deposit the money Rs 25000 by NRIS brought while coming to india.why the Govt has not specified RBI CHANDIGARH,which will very helpful to the NRIs of Punjab

  9. Anjan Bhattacharjee

    Me & Wife just got our Green card. We are retired.We have no remittance back to india. We have F.Ds for
    10 years + savings a/c. Can we change over to NRE a/c F.Ds ? We have also another savings a/c with 3 in 1
    Stock portfolio. Pl advise the best alternative for change.

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