Non-resident Indian or NRIs need a banking account in India to manage their earnings, and today, most banks allow NRIs to open an NRI bank account. Read on to know more about its benefits.
NRIs or Non-resident Indians have special banking needs, which are distinct from the resident Indians. In India, almost all the major banks offer an NRI account, and it can be opened only by individuals who qualify as an NRI as per the Indian Income Tax Act. There are three types of NRI accounts that the individual can open, namely, NRE (Non-Resident External) account, NRO (Non-Resident Ordinary) account, and FCNR (Foreign Currency Non-Resident) Account.
If you are looking to open an NRI account and are confused about which account to open, then you must be aware of the different features of these accounts. Depending on the type of NRI bank account you hold, you can deposit and maintain the funds in your account either in Indian currency or foreign currency.
Benefits of Opening an NRI Bank Account
Opportunity to invest in financial instruments
One of the most significant benefits of opening a bank account in India for the NRIs is that it allows them to invest in the money market instruments like shares, mutual funds, etc. Such investments are facilitated by PIS (Portfolio Investment Scheme) or NRI portfolio investment offered by the financial institutions.
As per the Reserve Bank of India mandate, the NRIs who invest in financial instruments in India, be it equity shares or debt instruments like company debentures, must invest through their NRI bank account only.
Get valuable returns
For most NRIs, one of the primary reasons for opening an NRI bank account in India is to remit the funds from overseas so that their family in India can access it. But, apart from helping them hold their earnings in Indian currency and giving them the benefit of liquidity, these accounts also provide valuable returns on the deposits.
Typically, the interest earned from the NRI fixed deposits are marginally higher than the interest offered to the resident Indians. Not to mention, the NRI fixed deposit account is secure, and it provides guaranteed returns as there is no risk of market fluctuations.
This is one of the most important NRI account benefits. If you have an NRE or FCNR account, then the interest earned from the deposits is fully exempted from tax as per the Indian Income Tax Act. Therefore, opening an NRE or FCNR fixed deposit account is an excellent way to reduce your annual tax liability.
No risk of currency rate fluctuations
If you earn an income in foreign currency, then you may want to save it in the same currency. An FCNR account provides you this facility; it allows you to hold your account deposits in specific foreign currencies. The most popularly accepted currencies include Australian Dollars, American Dollars, Japanese Yen, British Pound Sterling, and Euros.
This facility allows you to avoid the risk of the exchange rate fluctuations and, consequently, reduce the deposit value.
Joint Account facility
All banks in India that allow you to open and operate an NRI account enable you to hold and operate a joint account with either a resident Indian or an NRI. NRO account allows joint account with only an Indian resident, whereas both NRE and FCNR account allows opening a joint account with an Indian resident or another NRI.
Flexibility to choose the account type
Most NRIs opening an NRI bank account in India prefer operating a savings account to park their income in India. However, a person can also choose to open a recurring deposit or fixed deposit account to suit his/her specific needs.
Thus, there is more than one benefit of opening an NRI bank account in India. It allows you to keep your income safe, get valuable returns, and reduce your tax liability.