NRE ACCOUNT vs. FCNR(B) ACCOUNT vs. NRO ACCOUNT

NRE ACCOUNT vs. FCNR(B) ACCOUNT vs. NRO ACCOUNT

Particulars NRE Account FCNR (B) Account NRO Account
Who can open an account • NRIs and PIOs

(Individual of Pakistan & Bangladesh require prior approval of RBI)

• NRIs and PIOs

(Individual of Pakistan & Bangladesh require prior approval of RBI)

• Any person resident outside India (including NRI/PIO)

(Individual/Entities of Pakistan & Bangladesh require prior approval of RBI)

A Citizen of Bangladesh/Pakistan belonging to minority communities in those countries i.e. Hindus, Sikhs, Buddhists, Jains, Parsis and Christians residing in India and who has been granted LTV or whose application for LTV is under consideration, can open only one NRO account with an AD bank subject to the conditions mentioned in Notification No. FEMA 5(R)/2016-RB dated April 01, 2016, as updated from time to time.

Who is authorized to open • Authorised Dealer

• Authorised Banks (including co-op bank other than AD)

• Authorised Dealer • Authorised Dealer

• Authorised Banks (including co-op bank other than AD)

Currency • Indian Rupees • Any permitted currency (Any foreign currency which is freely convertible) •Indian Rupees
Type of Account • Savings, Current, Recurring, Fixed Deposit. • Term Deposit only • Savings, Current, Recurring, Fixed Deposit.
Period for fixed deposits • From one to three years, However, banks are allowed to accept NRE deposits above three years from their Asset-Liability point of view. Between 1 to 5 years As applicable to resident accounts.
Rate of Interest As per guidelines issued by the Department of Banking Regulations
Repatriability • Repatriable • Repatriable Not repatriable except for all current income.

Balances in an NRO account of NRIs/ PIOs are remittable up to USD 1 (one) million per financial year (April-March) along with their other eligible assets.

Taxability Income earned in the accounts is exempt from income tax. Income earned in the accounts is exempt from income tax. Taxable
Joint Account May be held jointly in the names of two or more NRIs/ PIOs.

NRIs/ PIOs can hold jointly with a resident relative on ‘former or survivor’ basis (relative as defined in Companies Act, 2013). The resident relative can operate the account as a Power of Attorney holder during the life time of the NRI/ PIO account holder.

May be held jointly in the names of two or more NRIs/ PIOs.

 

May be held jointly with residents on ‘former or survivor’ basis.

Operations by resident POA holder Permitted

• Withdrawal for local payments

• Make investments in India (only if the account holder eligible to make investment in India)

• Remittance to account holder himself through banking channels

 

Prohibited

• Remittance outside India to other than account holder himself

• Make payment by gift to resident

•Transfer funds to other NRE account

Operations in the account in terms of Power of Attorney is restricted to withdrawals for permissible local payments in rupees, remittance of current income to the account holder outside India or remittance to the account holder himself through normal banking channels. While making remittances, the limits and conditions of repatriability will apply.
Change in residential status from Non-resident to resident NRE accounts should be designated as resident accounts

or

• Funds held in these accounts may be transferred to the RFC accounts

immediately upon change of residential status.

• FCNR (B) deposits allowed to continue till maturity at the contracted rate of interest

 

• AD should convert the FCNR(B) deposits on maturity into resident rupee deposit accounts or RFC account

• From Person Resident Outside India (PROI) to Person Resident in India (PRI): Immediately designated as resident accounts.

 

 

 

• From PRI to PROI: Immediately designated as NRO account.

Loans in India AD can sanction loans in India to the account holder/ third parties without any limit, subject to usual margin requirements. These loans cannot be repatriated outside India and can be used in India only for the purposes specified in the regulations.

In case of loans sanctioned to a third party, there should be no direct or indirect foreign exchange consideration for the non-resident depositor agreeing to pledge his deposits to enable the resident individual/ firm/ company to obtain such facilities.

In case of the loan sanctioned to the account holder, it can be repaid either by adjusting the deposits or through inward remittances from outside India through banking channels or out of balances held in the NRO account of the account holder.

The facility for premature withdrawal of deposits will not be available where loans against such deposits are availed of.

The term “loan” shall include all types of fund based/ non-fund based facilities

Loans against the deposits can be granted in India to the account holder or third party subject to usual norms and margin requirement. The loan amount cannot be used for relending, carrying on agricultural/ plantation activities or investment in real estate.

 

The term “loan” shall include all types of fund based/ non-fund based facilities.

Loans outside India Authorised Dealers may allow their branches/ correspondents outside India to grant loans to or in favour of non-resident depositor or to third parties at the request of depositor for bona fide purpose against the security of funds held in the NRE/ FCNR (B) accounts in India, subject to usual margin requirements.

 

The term “loan” shall include all types of fund based/ non-fund based facilities.

Not permitted
Permissible Credits Credits permitted to this account are inward remittance from outside India, interest accruing on the account, interest on investment, transfer from other NRE/ FCNR(B) accounts, maturity proceeds of investments (if such investments were made from this account or through inward remittance).

Current income like rent, dividend, pension, interest etc. will be construed as a permissible credit to the NRE account.

Personal cheques of FCA outside India/travellers cheques/bank drafts deposited by the account holder in person during his temporary visit to India.

Tender of foreign currency/banknotes during his temporary visit to India.

Refund of share/debenture subscriptions to new issues of Indian companies or portion thereof, if subscription amount was paid from NRE/FCNR(B) a/c or out of inward remittances from outside India through banking channels.

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 original payment was paid from NRE/FCNR(B) a/c or out of inward remittances from outside India through banking channels and AD is satisfied about the genuineness of the transaction

Inward remittances from outside India, legitimate dues in India and transfers from other NRO accounts are permissible credits to NRO account.

 

Rupee gift / loan made by a resident to a NRI/ PIO relative within the limits prescribed under the Liberalised Remittance Scheme may be credited to the latter’s NRO account.

Permissible Debits Permissible debits are local disbursements, remittance outside India, transfer to other NRE/ FCNR(B) accounts  of the account holder or any other person eligible to maintain such account and investments in India.

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 / special permission granted by RBI

The account can be debited for the purpose of local payments, transfers to other NRO accounts or remittance of current income abroad.

Apart from these, balances in the NRO account cannot be repatriated abroad except by NRIs and PIOs up to USD 1 million, subject to conditions specified in Foreign Exchange Management (Remittance of Assets) Regulations, 2016.

Funds can be transferred to NRE account within this USD 1 Million facility.

 

 

Compiled By CA Sunitha R. Furtado

Date : 12.12.2019