In the continuance of the Types of Account Maintained By Non-Resident (Part-1)

FOREIGN CURRENCY (NON-RESIDENT) ACCOUNT (BANKS) SCHEME [FCNR (B) A/C]:

Q 1. Who can open FCNR (B) A/C?

Ans: 1. Any Non-Resident Indian (NRI) & Person of Indian Origin (PIO) without any approval of the RBI with Authorised Bank.

2. Individuals/Entities of Pakistan and Bangladesh shall require prior approval of the RBI

Q 2. Can NRIs hold the account jointly with someone?

Ans: a. Two or more NRIs/PIOs may held/maintained the account jointly.

  1. NRIs/PIOs can also hold the account jointly with a Resident Relative (defined as per Companies Act).  Power of Attorney granted to the Resident relative for operating the account on the behalf of Accountholder.

Q 3. In which form accounts may be maintained?

Ans: The accounts may be maintained in the form of Term Deposit.

Q 4. Which type of currencies denominated by this account for putting through  bonafide transaction?

Ans: Any permitted currency (which is freely convertible).

Q 5. What is the time period of Fixed Deposits?

Ans: Minimum tenure is 1 year

Maximum tenure is is 5 years.

Q 6. What is Permissible Debits?

Ans: Following type of debits which are permitted by RBI are below mentioned:

  • Local Disbursements
  • Remittance outside India
  • Transfer to another NRE/FCNR (B) accounts
  • Made investments in India (through shares/securities/commercial paper issued by Indian Company).

Q 7. What is Permissible Credits?

Ans: Following type of credits which are permitted by RBI:

  • Inward Remittance from outside India.
  • Interest accruing on this account
  • Interest on investment made in India
  • Transfer from other NRE/FCNR(B) Accounts
  • Maturity proceeds of investments (Condition: Such Investment should be made from this account/through inward remittance.)
  • Various types of Current Income also permitted:
  • Rent
  • Dividend
  • Pension
  • Interest etc.

One should have to take care that credits only in the nature of repatriable character are permitted by the RBI.

Q 8. Whether any exemption granted to the income earned in such account?

Ans: Yes, exemption is granted to those income which has earned in this account from the income tax .

Q 9. Whether any loan facility available to the NR under the NRE A/c?

Ans: Yes, the Authorised Dealer can sanction loans to the account holder without any limit, subject to usual margin requirements.(Loan Facility Available in India)

Condition imposed by the RBI:

  • Amount of loans cannot be repatriated outside India.
  • Loan Amount can be used only for specified purpose in India.

Q 10. What is the procedure for repayment of loan granted in India ?

Ans: Amount of loan can be repaid in three ways:

  • By adjusting the deposits or
  • Through inward remittances from outside India through the banking channels or
  • Out of the balances held in NRO Account of the account holder.

Q 11. Is there any loan facility available under this account from outside India?

Ans: Yes, loan may be granted outside India by the Authorised Dealers.

At the request of depositor only for bona fide purpose against the security of funds      held  in the NRE/FCNR (B) Accounts in India.

Q 12. Is third party on the behalf of account holder eligible to take loan in such type of account?

Ans: Yes, AD can sanction loans whether in India or outside India to the Third Party on behalf of the account holder.

Q 13. Can the residential status be changed from the Non-Resident to the Resident?

Ans: Account holder has an option to change his/her status from NR to R on the maturity of the FCNR (B) deposits.  AD should convert the FCNR(B) deposits on being mature into the Resident Rupee Deposit A/c or RFC A/c.

NON-RESIDENT ORDINARY RUPEE ACCOUNT SCHEME [NRO A/C]:

Q 1. Who can open NRO A/C?

Ans: a. Any person resident outside India for putting through bonafide transaction in Rupees.

b. Individuals/Entities of Pakistan Nationality shall require prior approval of the RBI.

c. With the prior approval of the RBI, entities of Bangladesh Origin.

Q 2. Can NRIs hold the account jointly with someone?

Ans:  a. Two or more NRIs/PIOs may held/maintained the account jointly.

1. NRIs/PIOs may also held the account jointly with Resident

Q 3. Which type of accounts maintained under this?

Ans: The following types of accounts can be maintained under NRO scheme:

1. Savings A/c

2. Current A/c

3. Recurring A/c

4. Fixed Deposit A/c

Q 4. Which currencies are denominated in this account?

Ans: Only INR (Indian Rupees) are denominated.

Q 5. What is the time period of Fixed Deposits?

Ans: The period is same as applicable to the Resident accounts.

Q 6. What is Permissible Debits?

Ans: Following are the type of debits permitted by the RBI:

1. Local Payments

2. Transfer to the other NRO Accounts

3. Remittance of current income abroad

[Current Income: Rent, Dividend received]

Q 7. What is the restriction imposed by the RBI on repatriation?

Ans: Upto USD 1 Million per F.Y. can be repatriated outside India subject to the conditions mentioned in Foreign Exchange Management (Remittance of Assets) Regulations, This facility is available only to the NRIs/PIOs.

Q 8. What is Permissible Credits?

Ans: Types of Permissible Credits:

1. Inward remittances from outside India.

2. Legitimate dues in India.

3. Transfer from other NRO Accounts.

4. Rupee Gift*

5. Loan made by a Resident to NRI/PIO relative*

* Upto the limits prescribed under the “Liberalised Remittance Scheme”.

Q 9. Whether any exemption granted to the income earned in such account?

Ans: All incomes which are earned through this account are taxable. NOT EXEMPTED.

Q 10. Whether any loan facility is available through this A/c?

Ans: The account holder/Third Party is eligible to avail the loan facility which are granted against the deposits only (Subject to usual norms & as per margin requirement)

Q 11. What are the restrictions imposed on utilization of loan amount?

Ans: Restriction imposed by the RBI on utilization of loan amounts:

1. Can’t be used for relending purpose.

2. Can’t be used for carrying Agricultural /plantation activities.

3. Can’t be used for the investment in Real Estate.

Q 12. Is there any loan facility available outside India?

Ans: Not Permitted. (Loan facility is available only in India under the NRO A/c)

Q 13. Is third party on the behalf of account holder eligible to take loan in such type of account?

Ans: Yes, AD can sanction loans whether in India to the Third Party on behalf of the account holder.

Q 14. Can the residential status be changed from the Non-Resident to the Resident?

Ans: Whenever the accountholder returns to India for any purpose indication his/her intention to stay in India for an uncertain period, then status of this account will change from NRO A/c to Resident A/c.

Likewise, when a resident Indian becomes a person resident outside India, his existing resident account should be designated as NRO account.

Apart of the NRO A/c, FCNR (B) A/c, NRE A/c, person resident outside India may open the following types of accounts:

1. Special Non-Resident Rupee Account (SNRR A/c)

2. Escrow A/c

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