What are NRI accounts and their types?


Non-Resident Indians have various options at their disposal when it comes to choosing a bank account for depositing their savings. This article discusses the different types of NRI accounts, their features, and their benefits.   

What is the full form of NRI, and what is an NRI account?

The Income Tax department defines an NRI or a Non-Resident Indian as “an individual who is a citizen of India and is not a resident of India.” Therefore, to understand the group that NRIs constitute, one must understand the definition of a resident. An Indian resident is an individual who: 

  • has lived in India for more than 182 days in the previous year, or
  • has lived in India for more than 60 days in the previous year and 365 days or more during the four years immediately preceding the previous year.

NRI accounts help NRIs deposit their savings in a different denomination in their bank account and repatriate this amount back home to India.  

What are the types of NRI accounts? 

Popular banks in India, like IDFC FIRST Bank, offer three types of NRI accounts to customers: 

  • NRE (Non-Resident External) accounts, 
  • NRO (Non-Resident Ordinary) accounts, and
  • FCNR (Foreign Currency Non-Resident) bank accounts. 

Features and benefits of various NRI accounts 

A relative comparison among various NRI accounts can exhibit their discrete features and benefits. Here is a point-by-point summary of their key features and benefits: 

  • The objective of NRI accounts

NRIs can use an NRE account to deposit foreign earnings in the Indian currency (INR). NRO accounts, conversely, are used to deposit funds originating in India. FCNR accounts help NRIs deposit their salaries in foreign currency in an Indian bank account.

  • Taxation of NRI accounts in India

The Indian Government does not tax NRE account deposits. However, the 30% rate tax slab applies to NRO account deposits. FCNR account deposits, too, are not taxable in India. 

  • Denomination of bank deposits

You can deposit money in foreign currency in NRE accounts and INR in NRO accounts. For FCNR accounts, you must deposit in any of the following denominations: USD, GBP, AUD, SGD, CAD, CHF, HKD, EUR, and JPY. 

  • Denomination of bank withdrawals 

You can withdraw money from NRE accounts and NRO accounts in INR. With FCNR accounts, you can withdraw money in any foreign currency.

  • Exchange rate risk 

NRI accounts also expose NRIs to a form of risk called exchange rate risk. The value of INR is subject to constant change against the US Dollar or any other foreign currency. This change also affects the value of deposits in NRI accounts. Owing to currency fluctuations, NRE accounts have a foreign exchange rate risk. However, FCNR accounts and NRO accounts do not face this risk. 

  • Joint account provision

NRIs can open a joint NRE account, a joint NRO account, and a joint FCNR account. 

NRI accounts are essential for non-resident Indians to access their funds, invest, and send their savings to families in India. However, when opening an NRI account, you must choose a specific type of account based on your financial requirements and utilities. Also, go through the interest rates to enjoy comprehensive benefits on your account.  

Interesting Related Article: “The Advantages of Having an NRI Savings Account