It’s not compulsory for NRIs to open an NRI bank account in India, but it is compulsory to convert your resident bank account to NRO bank account as per the FEMA law.
If an NRI don’t have any resident saving account, which is very rare in today’s internet banking world, then you don’t require to inform your bank about your residential status, but you have to mention that when you pay income tax. However, if you have no income in India, you don’t require to pay any tax, but many NRIs does have income in India. Therefore, they are required to pay taxes as well.
4 Reasons to open an NRI bank account for Overseas Indian
Now, let’s see some of the essential reasons to open NRI accounts
1) Required by Law, an NRI can only open NRI accounts In India
If an NRI aspires to open a bank account in India, it must be an NRI account, e.g. it could be NRO, NRE, FCNR or RFC account. An NRI cannot open current account or a resident saving account. In case, if you already have a saving bank account with any private or public sector bank or even with any bank run by co-operative societies, you require to inform them regarding your residential status so that your resident bank account can be converted to NRO bank account. According to FEMA, it’s necessary for an NRI to convert his resident account to NRO account. Moreover, you can also close your resident account if you don’t require an NRO account, e.g. in case, you don’t have any income in India.
2) For Investment purpose
NRIs has a unique saving instrument named NRE fixed deposit. Unlike resident and NRO fixed deposit, interest collected on NRE fixed deposit is tax-free in India, which makes it preferred fixed income investment among the all NRI community. Moreover, you can earn the interest you see and even no TDS is deducted on interest received by NRE FDs. Since the interest rate granted by Indian bank is also at par resident fixed deposit as well as USD touching close to 70 INR, investing money on NRE fixed deposit is very famous among the NRI communities.
3) To keep money in Indian Rupees
Most of the NRIs has expenditure in Indian rupees, e.g. they have to support their parents or some other investment for which they require Indian rupees. You need an NRI bank account to hold your money in Indian rupees or INR. You can open NRO or NRE account depending upon your requirement.
4) To deposit Indian income
Most of the NRIs have real estate investment in India. Many of them hold multiple flats on metro cities like Mumbai, Chennai, Pune, Bangalore etc which earn them rental income. You require an NRO account to save that rental income. Furthermore, any other income which is earned in India needs to continue to NRO account e.g. royalty, service charges etc.
These were few of the basic reasons to open NRI account. As I said, it’s not compulsory for an NRI to open NRI account but you need it sooner or later. One thing is obvious that you cannot hold your resident saving bank account, you either require to convert it into NRO bank account or you can also close it. In addition to it, NRI can only open NRI accounts which are NRO (Non-Resident Ordinary), NRE (Non-Resident Externa), FCNR and RFC, choose the one which suits your need.