Non-resident seafarers are allowed to have various types of bank account as follows: –
Non-resident Ordinary Account (NRO)
It is a rupee-denominated saving account for managing income earned in India by the non-resident. Interest earned on this account is not tax-free and TDS is deducted by the bank @ 31.2%. It is highly advisable to file an income tax return if your bank has deducted any TDS on interest earned during the year as you may get a refund of the whole amount deducted under TDS as a non-resident seafarer does not have any income in India and enjoy tax-free limit of Rs 2,50,000 per year(FY 20-21). Also, if you do not file the return then the income tax department may send you a notice for filing of return as you have some income on which TDS has been deducted but not claimed by you. For more details, click here.
Non-resident External Account (NRE)
It is a rupee-denominated saving account for transferring the foreign income of the non-resident to India. Interest earned on this account is generally tax-free under section 10(4)(ii), so no TDS is deducted by the bank. However, it depends on your resident status under FEMA. For more details, click here.
Foreign Current Non-Resident Account (FCNR)
It is a fixed deposit account opened for transferring foreign income of the non-resident to India. The account is maintained in foreign currency and the interest earned on this account is generally tax-free under 10(15)(iv)(fa) so no TDS is deducted by the bank. For more details, click here.
FAQ on bank accounts
Non-resident citizens are not allowed to maintain normal saving account in India as per rules of FEMA. It is illegal to have normal saving account and it is a duty of non-resident to close or convert the normal saving account to non-resident ordinary (NRO) account.
As you are going to become resident in India for the financial year 20-21 so you cannot maintain NRE/NRO bank accounts in India as per FEMA. Either you have to close the account or convert them as below within a reasonable time. No time period is defined anywhere but it is your duty to inform your bank and should get the account converted within a reasonable time period (around 1-3 months):
NRO Bank Account – You can ask your bank to convert it into normal ordinary saving account.
NRE Bank Account – You can ask your bank to convert it in Resident Foreign Currency Saving account or Resident Rupee Saving account. You can enjoy tax free interest if you are a resident but not ordinary resident
Yes, joint holders are allowed with NRE/NRO bank accounts. You can have a resident as join holder for your NRO bank account for the NRE bank account the joint should also be a non-resident.
No, interest is tax-free only when you are allowed to have an NRE bank account as per the provision of FEMA. The interest earned by you will become taxable in India. For more details, click here.
Yes, you can transfer the balance available in NRE/NRO bank account to your normal saving account. No tax is applicable on such transfer.