The Foreign Exchange Management Act (FEMA) does not allow Non-Resident Indians (NRIs) to have local resident accounts in India. However, whether from India or from the UAE, an NRI can have various platforms to open investment accounts in India.
Various options available to an NRI
(a) Non -Resident (Ordinary) rupee account (NRO Account)
(b) Non-Resident (External) Rupee account (NRE Account)
(c) Fixed Deposit under (a) and (b) i.e. NRO-FD & NRE-FD
(d) Foreign Currency Non-Resident (FCNR) Account
(e) Investment services account (ISA)
(f) Portfolio Investment Scheme (PIS)
An NRO account is a Non-Resident (Ordinary) rupee account. Income earned in India can be deposited into a NRO account, for example, rental income, property sale value or interest income from India. Further, funds can be deposited into an NRO account through foreign remittance.
A NRE is a Non-Resident (External) rupee account permits for remittance of money from outside India to India. The funds in an NRE account can be remitted within India or repatriated to outside India.
Another investment alternative is in the form of rupee-based Fixed Deposit (FD). The interest earned on the FD made through an NRE account is non-taxable in India. However, the interest earned on the FD made through an NRO account would be taxable in India.
NRIs also have an option to open a Foreign Currency Non-Resident (FCNR) Account. FCNR account is in the nature of a fixed deposit held in a foreign currency. The account could be held in a choice of nine different foreign currencies: USD, GBP, EUR, JPY, CAD, AUD, SGD, HKD and CHF.
To invest in Mutual Funds, NRIs have an option to open an Investment Services Account (ISA) with a bank. An ISA linked to a bank allows NRIs to buy and sell mutual funds units. Permanent Account Number (PAN) is mandatory irrespective of the amount of investment.
Alternatively, to invest directly into Mutual funds, NRIs can register with the Asset Management Company (AMC).
NRIs can also invest in the Indian stock market through the Portfolio Investment Scheme (PIS). PIS is a scheme of the Reserve Bank of India. It enables NRIs to transact in shares and convertible debentures of Indian companies on a recognised stock exchange. The transactions should be routed through NRE or NRO account with a designated bank branch.
NRIs can of course open the above accounts while travelling to India. It is important to carry the original documents for KYC formalities. Know-Your-Customer (KYC) formalities include filling the application form and submitting required documents such as proof of overseas presence, identity proof, address proof and photograph.
Documents needed for KYC formalities
- Proof of overseas presence
- Identity proof
- Address proof
- Photographs
NRIs can also open the above accounts while being in the UAE. Some Indian banks have their representative offices in the UAE. The representative offices may ask the proposed account holder to visit their office or send a representative to collect the completed form and documentation.
NRIs can also open the above accounts while being in the UAE. Some Indian banks have their representative offices in the UAE
Alternatively, some Indian banks also provide an option to download the requisite forms from their websites along with the list of required documents. All documents need to be attested by any of the following authorities: Notary public, any court of law, magistrate, judge, local banker with bank seal (along with the name, designation, employee code of the person doing attestation) or by the Indian Embassy/Consulate General of the country.
- The writers are experts from AskPankaj DWC-LLC
