A. NRE Accounts:
These accounts are maintained in Indian rupees. Accounts can be in the form of Current, Savings, Term Deposit and Recurring Deposit. Joint accounts are permitted with NRIs. Account can be opened by direct remittance from abroad, transfer from existing NRE, FCNR(B) accounts or with foreign currency note, travellers cheque tendered personally by NRIs during their visit to India.
Residents in India can be authorised to operate the account for local payments. Balance is exempt from wealth tax and interest earned is exempt from Income Tax. Loans can be availed against security of NRE Term Deposit and as per the recent RBI guidelines, the maximum loan amount is stipulated as Rs. 20 lacs. Since these accounts are kept in Indian rupees, customer is exposed to a probable loss in case rupee gets weaker. The rates of interest offered on NRE accounts are relatively higher when compared with that offered on FCNR accounts.
B. FCNR Accounts:
In India, FCNR (Foreign currency non resident) deposit is accepted in US dollar, Canadian Dollar, Australian Dollar, Japanese Yen, British Pound and EURO for various maturities insulated against exchange rate fluctuations. In India, RBI has permitted banks to maintain foreign currency accounts in the above 6 currencies and hence, thesecurrencies are often referred as designated currencies. Balance and interest is repatriable.
Joint accounts are permitted with NRIs. Rupee or Foreign Currency loan can be availed against deposits. When compared to NRE accounts, there is a probable loss in case rupee gets stronger. These accounts are only of fixed deposit type and the minimum deposit period is 1 Year. Banks also provide forward contract facility to the customer, so that he will also get the benefit of prevailing forward premium. As in the case of NRE accounts, the balance is exempt from wealth tax and interest earned is exempt from Income Tax.
C. NRO Accounts:
Accounts maintained in Indian Rupees for routing bona fide local remittance like rent, income from land etc. Joint accounts are permitted with NRIs or Residents. Interest earned in the account is subject to Indian Income Tax. Account can be maintained in the form of Current, Savings and Term Deposits and repatriation is restricted.
D. RFC Accounts:
A person of Indian Origin who returns to India for permanent settlement after a stay of minimum period of one year abroad is eligible to open RFC account. Assets acquired or held at the time of return are eligible for credit to RFC account.
For Example: Funds in bank account outside India, Income such as dividend, interest, and profit earned on assets abroad, sale proceeds of eligible assets, pension and other monitory benefit received from outside India arising out of employment taken up abroad, foreign currency notes, travellers cheques brought to India at the time of return and balances in NRE & FCNR accounts.
The balance can be repatriated or credited to NRE or FCNR(B) accounts, if the account holder becomes an NRI subsequently. Balance in the accounts can be used for bona-fide expenses like travelling expenses for going abroad, children’s education abroad etc.
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