Context:
Rams Problem Ram an NRI in the US was having a tough time when his parents in India tried to remit 10 lakh to his US bank account after selling a property. The transfer from India to a foreign account was a hassle especially with the TCS requirement for amounts over 7 lakh.
Solution: NRO Account
- NRO Account
- Rams banker friend who is an Overseas Citizen of India advised him to send the amount to an NRO (Non Resident Ordinary account) in India rather than to his US account.
What is an NRO Account?
- An NRO account is used by NRIs, OCIs and PIOs to deposit income gifts or capital gains earned in India.
- This means there will be no requirement to submit forms or deal with TCS making it easier for Rams parents.
Advantages of an NRO Account
- Funds in an NRO account can easily be used for transactions conducted within India or invested into financial instruments such as stocks bonds and mutual funds.
- The money first needs to be transferred to an NRE Non Resident External account in order to be repatriated taxfree for international transfers.
Foreign Currency Non Resident FCNR
- FCNR Accounts
- The NRIs and OCIs can open Foreign Currency NonResident (FCNR) accounts for locking up funds in foreign currency denominated fixed deposits. This helps to get back the amount in their home country and avoids forex risks.
Types of foreign bank accounts in India
- Foreign currency account: A current, savings, or term deposit account held in a foreign currency.
- Non-Resident Ordinary (NRO) account: A bank account in Indian rupees for non-resident Indians (NRIs) to manage income earned in India.
- Non-Resident External (NRE) account: A bank account for NRIs to conduct banking transactions in India.
- Resident Foreign Currency (RFC) account: A savings account for NRIs who have returned to India and hold funds in foreign currency.
- EEFC account: An account for making money in foreign currency through exports or other international activities.
Documents required to open a foreign bank account
- Proof of identity, such as a passport, driving license, or national ID
- Proof of address, such as a bank statement or utility bill
- Employment, income, and tax details
- Additional documents, depending on qualification status, local laws, and regulations
Foreign Bank Accounts Benefits Tax Implications and Eligibility
What is a Foreign Bank Account?
A foreign bank account also known as an offshore bank account is an account held in a country other than the account holders country of residence or citizenship.
Why Open a Foreign Bank Account?
- Investment
- Opportunities provision for various financial instruments along with investment, avenues available within the overseas country.
- Economic Shocks Protection
- Protects assets from economic shocks in ones home country.
- Higher Interest Rates
- Certain overseas banks provide savings interest rates that are higher than those offered at home.
