Non-resident Indians who live and work overseas have different investment and banking needs. They also usually face unique challenges when handling their investments and finances. To make investments easier, the RBI has introduced specialised NRI Accounts. These include a Non-Resident Ordinary Account and a Non-Resident External or NRE Account. Let us understand their role in the investment process a little better.

Understanding NRO Accounts

An NRO Account is a rupee-denominated account that NRIs can open. This account lets you manage and access any income you still earn in India. For example, you may earn interest from Fixed Deposits or dividends from Mutual Funds. You could also have rent income from a property you own in India. You can open an NRO Account online and conveniently deposit the income from such sources to such an account. The money here is maintained in Indian Rupees.

You can deposit foreign currency into this account. However, it gets automatically converted into INR at the prevailing forex rates. An NRO Savings Account also lets you earn interest at competitive rates on the money you deposit in the account. However, the interest earned is taxable.

Understanding NRE Accounts

An NRE Bank Account is also a rupee-denominated account. It lets you deposit your foreign currency earnings and park it in an Indian account. However, no rupee credits are allowed here. Once you deposit the funds in foreign currency, the amount gets automatically converted to INR at the current foreign exchange rates. You can open an NRE Account individually or jointly with another NRI. You can also open such an account with a Person of Indian Origin.

The principal amount and the interest you earn in an NRE Account are tax-free in India. Besides, the principal and interest amounts are also freely and fully repatriable.

Role in NRI investments

NRIs can use their NRE and NRO Bank Accounts for different investment opportunities in India. These include the following:

·         NRIs can use their NRE or NRO Accounts to invest in the stock market in India using the Portfolio Investment Scheme route.

·         You can use these NRI Accounts to invest in real estate in India.

·         By opening an NRO Account, you can keep your money working and earn interest at competitive NRO Account interest rates. Besides this, you can also benefit from attractive interest rates by opening FDs via the funds in your NRE and NRO Accounts.

·         NRIs can consider investing in Mutual Funds through their NRO and NRE Accounts.

Conclusion

NRE and NRO Accounts let you manage your funds and invest in India. Seek some guidance from experienced financial advisors before proceeding.