You will need to open either an NRE (Non Resident external), NRO (Non
Resident ordinary), or FCNR (Foreign Currency Non Resident Account).
Each of these accounts serve a different purpose and you need to
choose an account which fits your needs. While FCNR is the best
option to protect your money from exchange rate fluctuation, an NRE
account will provide tax free interest and NRO account would be ideal
if you want to keep dividend, salary or rental income in Indian
Rupees (INR).
Let us try to understand these accounts better from the NRI (your)
perspective.
As discussed earlier, you need to identify why you want to open a
particular account. Once you are clear about the objective, be it
remitting funds, keeping dividend or rental income or protecting your
money from foreign exchange risk, you are ready to open the account.
NRE Account
If you need flexibility in remitting your earnings to India or
repatriating them back to your home country, this account would serve
your purpose. It is a tax-free account and the interest is tax free
as well. The fixed deposit rates are currently 6.60% for
short-term deposits, so you could open an FD after opening a savings
account.
You cannot deposit Indian currency, income from salary, rent, or
dividends here. Also, when you repatriate money, you are exposed to
exchange-rate risk.
However, don't open an FCNR account with funds from your NRE account
as you will be charged two-way exchange conversion costs.
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