What are the different NRI Accounts?

Why in news?

• Transactions from mobile numbers of ten countries will be enabled to begin with — Singapore, Australia, Canada, Hong Kong, Oman, Qatar, United States of America, Saudi Arabia, United Arab Emirates and United Kingdom.
• These NRI accounts will be permitted to onboard and transact in UPI, provided the member banks ensure such accounts are only allowed as per the extant FOREIGN EXCHANGE MANAGEMENT ACT (FEMA) regulations and they adhere to the guidelines issued by the Reserve Bank of India.
• The NPCI noted that all onboarding and transaction level checks — such as cooling period and risk rules — will be applicable as per existing UPI guidelines. 

Different NRI Account types: 

• In India, there are three types of accounts that Non-Resident Indians (NRIs) can open – Non-Residential External (NRE) Account, Non-Residential Ordinary (NRO) Account, and Foreign Currency Non-Residential (FCNR) (B) Account. 

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NRE Account:

• NRE Account can be opened and maintained by NRIs with earnings originating from the respective individual’s country of residence but shall be held in Indian rupee denominations.
• Withdrawals can be made in the currency in which the NRI resides and therefore there is a possibility of amount fluctuation.
• Income from the NRE account is tax-free as the principal and interest amounts are exempted from taxation. 

NRO Account:

• An NRO Account can be opened with income earned from within India.
• The source of income can either be rent, dividends, etc.
• Even though deposits can be in INR or any other foreign currency, the withdrawals can only be in Indian rupees in an NRO account.
• Interest earned on the income in an NRO account is liable for taxation. 

FCNR (B) Account:

• Under this, NRIs or POI can make these deposits in the currency of their country of residence and shall be held in that account in any one of the foreign currencies prescribed by RBI.
• Income from the FCNR account is tax-free as the principal and interest amounts are exempted from taxation.
• The rate of interest does not fluctuate in an FCNR (Foreign Currency Non-Resident) account because of the deposits and withdrawals made in foreign currencies.

Q1) What is FEMA?

The Foreign Exchange Management Act (FEMA) is a law enacted by the Indian government in 1999 to regulate foreign exchange transactions in India. FEMA replaced the earlier Foreign Exchange Regulation Act (FERA), which had been in place since 1973.

Source: NRIs from 10 countries can use UPI with their international mobile numbers