Skip to main content

How to choose a Non Resident Account?

Invest Mutual Funds Online

Download Mutual Fund Application Forms

Buy Gold Mutual Funds

Consider taxation and currency risks before choosing between NRI, NRO and FCNR accounts

The rupee has slid from 51-52 per dollar in January to 56 this month. To arrest this fall, the Reserve Bank of India (RBI) deregulated interest rates on non-resident ordinary (NRO) and non-resident external (NRE) accounts in December 2011. Recently, it also freed rates on foreign currency nonresident (FCNR) accounts.

Interest rates on NRE accounts rose 350 to 400 basis points after the deregulation. "The interest rate on FCNR accounts may see a similar spike. For NRIs, this is great news.

But, how do you pick between these accounts? For most NRIs, tax liability on interest earned in these accounts and currency risk need to be considered before choosing. Heres some help:

NRE account

This is for foreign and repatriable funds. Foreign currency here has to be converted into rupees. State Bank of India (SBI) is now paying nine per cent on a one-year deposit, against 2.5 per cent in August 2011. Others like ICICI Bank, HDFC Bank and Bank of Baroda have hiked rates by 500 to 600 basis points. You can take a loan up to ~100 lakh against funds in this account. Joint accounts can be held only by NRIs.

The balance here is freely repatriable. Account holders use NRE accounts to play in currency. Opt for NRE deposits if you anticipate correction in rupee (appreciation). Say an NRI invested $100 when the rupee was at 50, or ~5,000 (100x50). Assuming he expects the rupee to appreciate to 45, he will make $111, plus interest on maturity (5,000/45). But if the rupee depreciates at the time of maturity and repatriation, he will lose.

The interest earned on this account is tax-free in India but can be taxed in countries where global income is taxed.

NRIs who do not earn enough interest in their resident countries can put money in NRE accounts for lucrative rates.

NRO account

This account can hold income earned in India (dividends, pension or rent.  NRO helps make payments in rupees and, hence, those with dependents in India. the NRO account does not allow withdrawing the deposited funds.

This, too, is a rupee account like NRE accounts, so currency risk exists. It allows only up to $1 million (~5.5 crore) to be repatriated per financial year. Most banks are paying between seven and nine per cent.

Any remittance done from an NRO account is subject to tax deduction at source (TDS), at 30 per cent. In case of a double taxation avoidance agreement (DTAA) between India and other countries, the TDS rate can be lower, like it is 15 per cent in the case of India and the US. NRO deposits may also be taxed in the NRI's resident country. NRO accounts can be jointly held even with an Indian resident.

FCNR account

The FCNR balance lagged NRE's, another reason to free its rate. It offers only term deposits of one to five years. The money put here can be held and withdrawn in foreign currency, involving zero currency risk.

On dollar and euro-denominated deposits, FCNR accounts earn between three and four per cent, depending on the term. Similarly, on pound-denominated deposits, it pays four-five per cent.

Principal and interest earned on FCNR is freely repatriable. Interest is tax free in India but can be taxed in the resident country, depending on applicable tax norms. Loans up to ~100 lakh can be extended against funds in an FCNR.

 

 

 

---------------------------------------------

Invest Mutual Funds Online

Transact Mutual Fund Online

Download Mutual Fund Application Forms from all AMCs

Download Mutual Fund Application Forms

Best Performing Mutual Funds

    1. Largecap Funds        Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds     Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    3. Mid and SmallCap Funds    Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    4. Small and MicroCap Funds             Invest Online
      1. DSP BlackRock MicroCap Fund
    5. Sector Funds              Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    6. Gold Mutual Funds             Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

 

Popular posts from this blog

ICICI Prudential Dynamic Plan Invest Online

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   ICICI Prudential Dynamic Plan             Invest Online This fund does remarkably well during falling markets, but fails to show the same prowess during a rising market. The fund sticks to its mandate to adapt to the dynamic nature of the market by shuttling between debt and equity. It takes aggressive asset calls in equity when the market surges by investing in quality mid-cap stocks. At the same time, it adopts a defensive strategy by investing in debt and cash when markets get overvalued, making it a good long-term choice.     For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call     Leave a missed Call on 94 8300 8300   Leave your comment with mail ID and we will ...
Read more

Feeder funds are the cheapest way to invest in gold

Buy Gold Mutual Funds Invest Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Call 0 94 8300 8300 (India)   There are four ways to put your money in gold — buying physical gold/jewellery , putting money in gold exchange-traded funds ( ETFs ), investing in a gold savings fund and going for the National Spot Exchange's e-gold. Now, some gold ETFs and e-gold even allow taking physical delivery of gold at the end of investment tenure. That might sound good if you wish to possess physical gold. But, given the firm price of gold today (almost ~31,000 per 10g), it is important that gold is bought through acost-effective avenue. Reason: Investing comes at a price. Add to that, India's gold buying is expected to decline in 2012 and 2013, according to the latest World Gold Council ( WGC )report. WGC Director Vipin Sharma feels gold imports may drop to 800 tonnes from 967 tonnes last year. And the mix between the jeweller...
Read more

Lump Sum or SIP?

Invest Mutual Fund Online     You have a lump sum in hand and you wish to invest in equity funds. However, you have heard a lot of talk about investing in equity funds through Systematic Investment Plans (SIPs) because they help average costs, ensure you do not ill-time the market, and help you invest in small sums, besides giving you many other advantages. So, should you invest the money you have in hand in one go, or let it remain in your bank account and then do an SIP? There is no harm in investing a lump sum amount. For all you know, compounding, over the long term, could work better with lump sum. However, make sure you fulfill all of these three criteria if you want to invest in one go. Else, SIP is the way to go. #1: You invest for the long term According to past data, ideally, if you have a time frame of 12 years or more, you can consider lump sum investing (provided you satisfy the other two conditions that follow). So, what is the sanctity behind 12 years? Is it because only...
Read more

Mutual Fund Review: Reliance Regular Savings Balanced

Reliance Regular Savings Balanced fund has shown great resilience during market crash After a shaky start, this fund has established itself as a strong contender in this space. In the past three years it has ridden the market well by not only delivering during the market run-ups but also displaying resilience during the crash. In 2008, it witnessed the second lowest fall among its category and last year it was amongst the top three performers with a return of 76 per cent (category average: 61%).   The poor underperformance in 2006 can well be credited to the low equity allocation of the fund, which stood at just over 10 per cent for only four months that year. Though the fund has the leeway to go up to 75 per cent in equity, it has never touched that limit. In fact, it has exceeded 70 per cent in just five months in its entire history. During the crash of 2008, the fund managers had no problem going right down to 54 per cent (equity exposure). Fund managers Omprakash Kukian and A...
Read more

Tax Returns: Myths and facts of filing your Tax Returns

THE fiscal year has ended and many choose to make tax-filling. Despite this being a regular, annual ritual, several tax payers have some misconceptions, some of which are listed below: Misconception No. 1 Filing tax returns is a complex and cumbersome process. I need a Chartered Accountant to help me file my tax returns. Contrary to popular belief, preparing and filing tax returns is actually quite simple. If you have a digital signature you can accomplish the entire process sitting at home on your computer thanks to the e-filing facility on www.incometaxindiaefiling.gov.in. Alternatively, you can submit the returns online, print a one-page receipt, sign it and drop it off at the income tax office within fifteen days of submitting the returns. No documents are required to be submitted with the receipt. However, if you want help, there are several third party service providers who offer tax preparation and filing services for a fee as low as Rs 200. Misconception No. 2 The interest I p...
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now