When it comes to banking and managing finances in India, a Non-resident Indian (NRI) can have a lot of questions. The banking regulations for NRIs (Non Resident Indians) are different from those of resident Indians. Therefore, they need to understand these banking regulations, the banking options available to them, the limits and documentation applicable, and so on.

Let us look at these aspects one by one. 

Essential NRI banking regulations and compliances
 

Banking involves money exchanging hands. In NRI banking this exchange involves overseas party(s). The flow of foreign currency across Indian borders is regulated by the Foreign Exchange Management Act (FEMA), 1999. To understand NRI banking regulations and compliances, we must understand the relevant pronouncements made by FEMA. 

FEMA defines how an NRI can conduct banking in India, how investments, purchases, and sales can be made, and how funds are transferred to and from India.

Opening a bank account – Non-residents can open,

- A Non-Resident (External) Account in Indian rupees (NRE Account)

- A Non-Resident (Ordinary) Account in Indian rupees (NRO Account)

- Foreign Currency Non-Resident Account in foreign currency (FCNR Account)

- Special Non-Resident Rupee Account in Indian rupees (SNRR Account)

Also read - NRI outward remittance: How to send money home without commissions?

NRE and FCNR can be opened by NRIs and PIOs (Persons of Indian Origin). NRO can be opened by any person resident outside India, while SNRR can be opened by people resident outside India but with business interests in India. There are no restrictive banking regulations on the number of accounts that an NRI can have, be it across different NRI account categories or within the same type.

• Types of deposits allowed –

An NRI can use an FCNR account to open a term deposit, while NRE and NRO accounts can also be used to open fixed deposits and recurring deposits. They can operate a current account using NRE, NRO and SNRR accounts. Only NRE and NRO accounts can be used to operate a savings account.

• Interest on bank accounts –

Interest earned on your FCNR and NRE accounts is exempt from income tax in India. Interest earned on the NRO account is taxable. TDS (Tax Deducted at Source) or DTAA (Double Taxation Avoidance Agreement) terms, whichever is beneficial can be opted.

• Investments by NRIs –

NRIs cannot invest in small savings schemes and public provident funds. They can purchase commercial or residential properties in India but not agricultural land or property, farmhouses, plantations, orchards, etc. Immovable property received by NRIs as a gift from relatives or through inheritance is allowed under FEMA.

• Student NRIs –

Students studying overseas are treated as NRIs and can receive remittances of up to $10 lakhs from their NRO accounts. They can receive profits into their NRO account from properties owned.

Managing international financial transactions
 

There are no banking regulations that restrict the remittance of foreign currency to India. However, a Currency Declaration Form must be provided to the Customs authorities if the NRI is carrying foreign currencies worth more than $5,000 or traveler’s cheques and banknotes worth more than $10,000.

Repatriation of funds from FCNR and NRE accounts can be made without restriction. In NRO accounts, only current income is freely repatriable, subject to payment of taxes. Current income can be rental income, interest income, fees, pension, etc. Capital receipts can be repatriated from the NRO account for a maximum of $1 million in a financial year. These include capital income such as the sale of property, maturity of fixed deposit, redemption of shares and mutual funds, etc.

The risk of non-compliance in the case of international transactions includes breach of statutory limits, failure to pay taxes or non-submission of required documents.

Other regulatory aspects in NRI banking
 

So far, we have observed that some of the important regulatory aspects in NRI banking regulations include the type of bank account that can be used, their usage and restrictions, and limits and documentation on remittances and repatriations, to name a few.

As an NRI you must also be familiar with a few other aspects, such as –

• DTAA benefits –

India has a Double Taxation Avoidance Agreement (DTAA) with over 90 countries. If the NRI banking customer is a resident of any of these countries, he or she may claim relief under DTAA. If tax is paid in the source country, the person can claim the foreign tax credit in India. Form 67 is filed with the Income Tax Department to claim this credit. This may also be applicable in the case of exemption of a certain type of income in one country, making it exempt in India as well. DTAA benefits also include the option to claim a reduced rate of tax. For instance, US residents can claim the concessional income tax rate of 15% on interest income earned in India. Obtaining a Tax Residency Certificate from the country of residence is mandatory for claiming DTAA reliefs.

• Account handling formalities –

Remote financial management is a part and parcel of NRI banking. To manage finances from foreign shores, NRI customers can assign a Power of Attorney, use a joint account, or appoint a mandate holder. These banking regulations are provided so that a resident Indian can be a party to the NRE/NRO account and look after the day-to-day transactions.

Technology and NRI banking
 

NRI banking experience has evolved over the years. Now, NRI bank accounts can be operated and managed around the clock and from anywhere in the world. The need to visit the branch is almost negligible nowadays, thanks to internationally accepted debit cards and mobile banking apps.

The Metra Trust NRI Banking customers, for instance, can carry out all banking cross-border transactions remotely, thanks to the user-friendly mobile app and internet banking. SMS and email alerts ensure that the NRI customer is always updated about the account activities.

Future of NRI banking regulations
 

The availability of UPI (Unified Payments Interface) facilities is undoubtedly one of the key developments shaping the future of NRI banking. So far, NRIs need a valid Indian number to use a UPI ID for any payments. But now NRIs residing in many other countries can use their local phone number to use UPI. Such numbers can be linked to their NRE/NRO account, and UPI can be used seamlessly thereafter. NRIs will now find it easy to make payments in India during their visits. They will also be able to transfer money to their family in India more easily. Besides, they can use it for payment on portals that accept UPI.

Also read - Discover Metra Trust NRI Banking Service under 3 minutes!

Navigate banking regulations with ease
 

Banking regulations for NRIs are not as simple as they are for residents. It is not uncommon for NRIs to often seek the help of a financial consultant. They aid them in the financial management of their funds and financial interests in India and help them adhere to the various NRI banking regulations. NRI banking with Metra Trust is certain to make these complications easier. In addition to the NRI savings and deposit accounts, Metra Trust assists its NRI banking customers with seamless remittances to and from India. Its fully digital banking experience means that all your cross-border banking needs are always within your reach.