SBI or State Bank of India offers many benefits to its NRI customers. This was said by India’s largest bank SBI on microblogging site Twitter. “Your earnings abroad can earn attractive returns back home. Select from our range of accounts, with flexibility to maintain savings in Indian or foreign currency, offering tax free interest income in India and other benefits,” State Bank of India said on its website. SBI offers four account types to NRIs – NRE, NRO, FCNR (B) and RFC.
Here’s a look at these four products:
SBI’s NRE or non-resident external account is an account meant to park funds remitted from overseas to India. Under NRE category, SBI offers rupee-denominated savings, current, fixed deposits (TDR/STDR) and RD (recurring deposit) accounts with investment terms from 1 year to 10 years, according to its website. Interest income under the NRE accounts is tax-free in India, SBI added.
State Bank of India’s NRO or non-resident ordinary accounts are also rupee-denominated accounts with a minimum investment term of seven days and a maximum of 10 years. The purpose of the NRO account is “to park funds remitted from overseas to India or funds from Indian sources”, the SBI portal noted. Unlike NRE accounts, interest income in NRO accounts is taxed as per Indian income tax rules. However, NRIs get a reduced tax under the Double Tax Avoidance Agreement (DTAA).
A double taxation pact or DTAA is a pact between two countries aimed at avoiding double taxation of income in both the countries.
However, the NRE and NRO accounts offered by the banking major have some things in common. Savings and current accounts under both the types – NRE and NRO – do not require an initial funding amount, as per the website. Additionally, savings NRE and NRO accounts are required to comply with SBI’s minimum balance or Monthly Average Balance (MAB) rules. Under these rules, the savings and current NRE as well as NRO accounts require a minimum average balance of Rs. 5,000 in metro branches, Rs. 3,000 in urban branches, Rs. 2,000 in semi-urban branches and Rs. 1,000 in rural branches. This requirement is similar to charges applicable on SBI savings accounts for residents.
Also, NRE and NRO recurring deposits require an initial funding/minimum balance of Rs. 100, it noted.
FCNR (B) or foreign currency non-resident (Bank) deposits are fixed deposits offered to NRIs to park funds (in foreign currency) remitted from overseas to India, SBI said on its website. Unlike NRE or NRO accounts, this is not a rupee-denominated option to park funds. FCNR (B) are denominated in a variety of currencies – dollar, British pound, euro, Canadian dollar, Japanese yen and Australian dollar. FCNR (B) deposits come with an investment period from one year to five years, SBI said. Similar to NRE accounts, interest income in this category is tax-free in India, it added. According to the SBI website, minimum balance required to put your money in the bank’s FCNR (B) deposits is 1,000 units of any of the six currencies.
State Bank of India also offers fixed deposits in the form of RFC or resident foreign currency account. RFCs are also foreign currency fixed deposits offered – in dollars, British pounds and euro. Similar to FCNR (B), the minimum investment period for opening an resident foreign currency FD is one year. However, the maximum period is three years in case of RFC, instead of five years in case of FCNR (B), according to the bank’s website. Interest income in RFC deposits is tax-free in India till the account holder’s status changes, SBI added.
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