Every individual needs to open a bank account to store, withdraw and deposit funds. After all, funds are essential to pay for medical emergencies, immediate transfer, and lots of other requirements. People take years to accumulate and earn money, but only seconds to spend it. Hence, it is vital to spend it wisely or instead invest it for making decent returns.

Many individuals travel to foreign countries to seek better opportunities like education, employment, and permanently settle there as they have to look after their priorities. They have to support their families financially and must not forget their duties towards them. They can quickly transfer funds to and from the accounts with the help of an NRI account. In India, there are three types of accounts for NRIs – NRE account, NRO account, and FCNR account.

These accounts can only be opened by individuals who have been residing out of the geographical territories of India for at least 120 days in a year and spend less than 365 days in India in four previous years. It is because such individuals’ residential status would then change to an NRI, as per the Income Tax Act 1961.

The NRI account facilitates the fulfilment of their investment objectives, financial obligations, and plans about their residency adequately. Here are the advantages it offers to NRIs:

• Facilitates investment in financial instruments

Individuals can take part in the stock market trading and different investment schemes through them. Such investments can take place through the Portfolio Investment Scheme (PIS) or NRI Portfolio Investment offered by financial institutions. It is an RBI scheme which allows NRIs to trade in market-linked financial instruments such as equity shares or debt instruments such as company debentures through their NRI bank accounts.

• Tax benefits

Individuals with NRE and FCNR (B) accounts can enjoy tax-free interest earnings on their deposits as per the Income Tax Act 1961. Such global profits would, however, be taxable in India if an NRI does not bear a tax liability to any other country, as per the Union Budget 2020 proposal.

• High returns 

NRIs choosing to park their funds in any fixed deposit account such as NRE FDs or FCNR enjoy substantial returns on total deposits at negligible risks. They have no underlying ties to stock market fluctuations.

• Avoidance of exchange rate fluctuations

Individuals can choose to deposit their earnings originating from a foreign country in an FCNR without undergoing conversion into INR. They can open NRI account online to avoid exchange rate fluctuations and consequent reduction in the deposit value.