Reserve Bank of India has permitted NRIs to open two types of accounts in India in order to repatriate funds from India. They are
1. NRO account (Non-resident Ordinary account)
When an Indian residing in India leaves India for a foreign country (other than Nepal and Bhutan) for taking up employment, business or living permanently outside India, or for any other purpose, indicating his intention to say outside India for an indefinite period, he becomes a person resident outside India.As per Indian laws, those who reside in india more than 6 months cannot become NRI for that particular financial year. For the person desiring to opt for NRI bank account in which funds cannot be repatriable to him abroad from India, either he can convert his own bank account as NRO account. Such accounts can also be opened with funds remitted from abroad. . 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 will be taxedx as per Indian Income-tax
2. NRE account (Non-resident External account)
It is opened in any bank in india by depositing foreign currency or travellors cheques. Funds remitted from overseas sources or local funds that would otherwise have been sent to the accountholder abroad can instead be deposited to NRE Accounts. On the other hand, local funds that aren’t eligible to be remitted abroad must be deposited to an NRO account. Interest earned in NRE account is tax exempt in India. No wealth tax is applicale and gift can be given to close relatives without attracting gift tax.
It’s easy to transfer money from an NRE to an NRO account. But it’s not possible to transfer money from an NRO account to an NRE account. Once NRI transfer money from an NRE to an NRO account, the amount is non-repatriable. Consequently, NRI cannot transfer it back to his account at abroad.
C.R. Venkata Ramani