In a globalized, networked world, where business and commerce has moved from the traditional 8 hour work day, geographies and boundaries have dissolved in the face of technologies. Post liberalization, India has moved on to a less stringent exchange regime and this has made it easier for the NRIs (Non Resident Indians) to remit funds back home.
Every year, Indians living abroad use 3 types of NRI accounts to transfer funds. It's believed that remittances from NRI's abroad to India in 2010-2011 were to the tune of 55 billion US dollars.
NRI's can operate three kinds of accounts in India. All the major Indian banks, both public sector and private offer these accounts to their customers. Online money transfer from these accounts has drastically reduced the time taken for the funds to be transferred to India.
Non Resident External accounts: NRE
- Funds In these accounts are held in Rupees
- NRIs can open these accounts
- Funds from abroad can be deposited in this account
- This type of account can be held jointly
- Funds in this account can be remitted to any country without requiring prior permission from the RBI.
- Nominations can be made for this type of accounts
- The interest earned on income is not subject to income tax in India.
Non Resident Ordinary accounts: NRO
- This account can be opened by an NRI or even a resident before becoming an NRI
- NRO accounts can only contain funds received in India
- The funds cannot be remitted abroad of to another NRE account
- NRO accounts can be held jointly by a resident and an NRI
- Interest earned on deposits in an NRO account are taxable as per prevailing rates in India
Non-Resident Foreign Currency Account: FCNR
This allows NRIs/PIOs to invest in deposits in India, in foreign currency. The idea is to protect the NRIs from fluctuations in the exchange rate. Currently FCNR deposits can be maintained in 6 currencies.
- US Dollars $
- Euros ?
- British Pounds £
- Australian Dollars
- Canadian Dollars
- Japanese Yen ¥
FCNR accounts are an attractive way for NRIs to get a good rate of interest on their deposits.
- They can only be opened by NRIs
- The term is between 1-5 years
- These accounts can be held jointly
- Nomination facility is available
- Loans can be availed against these deposits; however these loans are restricted in their use and amounts, by the law.
- The interest earned on the deposits is not taxable in India.
- The principal deposit is not taxed as Wealth Tax in India
- An overdraft of up to 90% of the deposit or 1 crore INR, whichever is more, is generally given to a FCNR account.
With the spread of the internet and the increased use of information technology, more and more NRIs are using online money transfer to send money to their near and dear in India.