An NRI, or Non-Resident Indian, encompasses two categories:
1. Indian citizens who reside outside India for employment, business, or a vocation with an intention to remain abroad for an indefinite duration.
2. Indian citizens temporarily sent abroad for employment purposes.
A person is considered a PIO (Person of Indian Origin) if they are a citizen of a foreign country (excluding Bangladesh and Pakistan) under the following circumstances:
1. They previously held an Indian Passport at any point in time.
2. They, their parents, or any of their grandparents were citizens of India.
3. They are the spouse of an Indian citizen who meets the criteria mentioned in (a) or (b) above, and they themselves are not citizens of Bangladesh or Pakistan.
Any Non-Resident Indian (NRI) or Person of Indian Origin (PIO) has the option to open two types of savings accounts with any Indian bank: NRE (Non-Resident External) and NRO (Non-Resident Ordinary) bank accounts.
An NRE (Non-Resident External) bank account is a savings account designed for Non-Resident Indians (NRIs). It’s termed “External” because the funds held in this account can be freely taken out of the country. In other words, the money in an NRE account is fully repatriable, meaning it can be converted into any foreign currency as desired by the account holder and sent abroad.
A NRO (Non-Resident Ordinary) bank account is a standard savings account available to Non-Resident Indians. It’s referred to as “Ordinary” because, unlike the NRE account, the funds in an NRO account cannot be freely taken out of the country. In other words, the money in an NRO account is not readily repatriable unless the account holder obtains certification from a Chartered Accountant.
Indeed, funds from an NRE account can be transferred to an NRO account without restrictions.
Transferring funds from an NRO account to an NRE account is not allowed.
NRIs are authorized to engage in direct investments in the shares and debentures of Indian companies, as well as units of mutual funds. They are also allowed to conduct portfolio investments, which involve purchasing shares and debentures of Indian companies through stock exchanges. These investment opportunities are available for both repatriation and non-repatriation purposes.
As previously explained, NRIs and PIOs are required to establish a demat account with a Non-Banking Financial Company (NBFC).
