An NRI account is simply a savings bank account that is opened by an NRI or PIO in India with the bank authorized by the RBI. It can be simply used in order to invest the money that is earned in foreign countries and is responsible for managing the money earned or is still earning in India.

Why NRI Bank Account is necessary in India?

1. It is to manage the money that is earned in India or are still earning.
2. It helps in investing the money earned in foreign countries.

NRI Account Types

The NRI account are divided into two types:

1. NRE Account- It is opened to facilitate the customers with the transfer of income abroad to India. It is a Indian rupee dominated account and is repatriable i.e. it allows the transfer of foreign income to India. The interest received from such accounts is tax-exempt.
2. NRO Account- It is opened in order to manage income such as rent, dividend, pensions, etc. earned in India on the non-repatriation basis. The income earned from abroad can be deposited in the account.

When an Indian citizen becomes an NRI, then his domestic bank account has to be converted into an NRO account by the bank.

The NRI bank accounts are categorized as the PIS or Non-PIS account. PIS or Portfolio Investment Scheme is an RBI scheme helps in trading and investments by NRIs and PIOs in the Indian Stock Exchange.

Note:

1. PIS permission is mandatory for the NRIs to trade in the stocks in India on repatriation basis.
2. Non-PIS Account can be used to sell the IPO shares and they are bought when the NRI was an Indian Resident. This account is used for investing in Mutual and trading in equity derivatives (F&O) on non-repatriation.

On a higher level NRI Bank Accounts are classified in three types:

1. NRE PIS
2. NRE Non-PIS
3. NRO Non-PIS

Note:

An individual can have one status at any point of time for the taxation purpose. An Indian resident is not liable to hold an NRI account and an NRI cannot hold a resident bank account in India. The account has to be converted according to the resident status when changed. The NRI Account and Investments in India are governed by RBI FEMA Regulation and Income Tax India Act.