Accout Opening by NRIs in INDIA

When an Indian national or person of Indian origin residing in India leaves India for a foreign country (other than Nepal and Bhutan) for taking up employment, business or vocation outside India, or for any other purpose, indicating his intention to say outside India permanently or for an indefinite period, he becomes a person resident outside India. His bank account, if any, in India is designated as an Ordinary Non-resident Account (NRO Account). Such accounts can also be opened with funds remitted from abroad. . As funds in this type of account are non repatriable, they cannot be remitted abroad to the account holders or transferred to their NRE Accounts without the Reserve Bank’s prior permission. Interest earned on these deposits is not exempt from Indian Income-tax.

Type of Account

The accounts may be maintained in the form of savings or current or term deposit accounts. The accounts can also be opened jointly by non-residents with their close relatives resident in India and operations thereon by the resident account holders can be made freely. If an account is used only for the personal or business needs of the resident account holder, it may be opened jointly even with a person who is not a close relative but this needs prior permission of the Reserve Bank. Interest earned on balances in NRO Accounts is not exempt from Indian Income-tax instead Income-tax (at present @ 20%) is deducted at source i.e. at the time of payment of interest by the bank. Balance held in NRO Account can neither be repatriated nor any remittance in foreign currency is allowed without prior approval of Reserve Bank.

Operation of the Account

There are not many restrictions on the operation of this account and a number of credit and debit transactions can be made after filling up Form A4. The following credit transactions can be made :

(a) Proceeds of remittances received in any permitted form through normal banking channels.

(b) Proceeds of foreign currency notes/traveller cheques tendered by the account holder during his temporary visit to India.

(c ) Remittance by way of transfer from rupees accounts of non-resident banks.

(d) Legitimate dues in rupees of the account holder in India.

Certain credits to the accounts such as proceeds of foreign inward remittances, dividend and interest earned on shares/securities acquired with the Reserve Bank’s permission (wherever necessary ) and held in India by the account holder, sale proceeds/maturity proceeds of shares/securities, surrender value of life insurance policies of the account holder and proceeds of cheques for small amounts upto specified limits can be made by banks without the Reserve Bank’ permission.

Following debit transactions can also be made after filling Form A4

(a) All local payments in rupees.

(b) Debits for investment and credits representing sale proceeds of investments may also be permitted by banks.

Withdrawals from these accounts can be freely made for local disbursements as well as for investments in Units of UTI, Government securities and National Plan/Savings Certificates, without prior approval of the Reserve Bank.

Change of Status from Resident to Non-resident Account vice versa

All resident accounts of a person with banks in India will automatically be treated ordinary non-resident accounts on his becoming non-resident.

Similarly NRO account may be redesignated as resident accounts on the account of holder becoming resident in India. It may be noted that residential status of a person will be determined as per the definition under Foreign Exchange Regulation Act, 1973.
With a view to providing further incentives and wider options to persons of Indian Nationality/Origin residing abroad (NRIs) and Overseas Corporate Bodies predominantly owned by NRIs (OCBs) as well as giving opportunities to persons of non-Indian origin and overseas corporate bodies owned by them for making investments in India, Reserve Bank has formulated Non-resident (Non-repatriable) Rupee Deposit Scheme. The Scheme came into effect from 15th June, 1992.

The scheme is open to all non-residents including foreign citizens of non-Indian origin (except Pakistani and Bangladeshi Nationals) and Overseas Corporate Bodies owned by them. Accounts under the Non-resident (Non-Repatriable ) Rupee Deposit Scheme may be opened in Indian rupees by authorised dealers out of the funds in freely convertible foreign exchange transferred for the purpose to India in an approved manner from the county of residence of the prospective non-resident account holder or from any other country. Accounts may also be opened by transfer of funds from the existing NRE/FCNR Accounts of the non-resident account holder. No penal interest is charged in case of premature withdrawal of existing NRE/FCNR deposits for the purpose of making investment under the scheme.