A person going overseas for study or employment must either open a new NRO account or convert their savings bank account to NRO. This is because of your Residency status which as per FEMA will make you NRI once you leave India with an intent of not coming back or staying abroad for long. (Read: 10 Important things to do before becoming an NRI)
It is advisable for NRIs who send money from their resident country to India for investment purposes, to support their family here, or to repatriate the funds after a few years, to open an NRE account. (Also Read: Who is an NRI?)
Managing or operating these accounts can be challenging in their home country for NRIs. Not only this, the other worry could be to manage the bank accounts of aged parents back home. While Internet banking comes to the rescue at this point, some issues may require a visit to a bank branch. In such cases, joint holdings and powers of attorney are useful. (Read: All you wanted to know about NRI Bank Accounts)
A joint holder or a power of attorney holder, as the case may be, may represent the Primary holder in transactions and retrieval of funds easily in case of any mishap.
Not only for Non-Resident Indians, but even for Resident Indians, Joint bank account holding is important for better money management. People above a certain age should not ignore this at all.
Now, it is a well-known fact that Resident Indians can have a joint account with another Resident Indian. (Read: Joint Holding or Nomination- what is better?)
But the question is, can an NRI be a joint holder in the resident account, or Can an Indian Resident open a Joint account with an NRI? In other words, be a joint holder in NRO and NRE accounts?
The answer to Both is Yes, with certain conditions laid down by RBI. In this article on NRI Joint Account with Resident Indian, I will be listing down the conditions for both bank accounts and Mutual fund Investments.
NRI Joint account with Resident- with NRI being the Second Holder:
RBI has allowed specific close relatives as defined in the Companies Act to be joint holders with Resident Indians bank accounts on an “Either or survivor basis”. This list includes all the important near relations. Check the list here.
NRI Joint Account with Resident Indian is possible with a close relative, in both Existing as well as New Resident bank account, subject to the following conditions:
- In this case, the account will be treated as a resident bank account for all purposes, and it will be subject to the same regulations as a resident bank account.
- The NRI close relative may not credit this account with any cheques, instruments, remittances, cash, card, or any other proceeds.
- The NRI close relative shall operate such an account only for and on behalf of the resident for domestic payment and not for creating any beneficial interest for himself.
- NRI close relatives who become joint account holders with more than one resident should be close relatives of all the resident account holders.
- In the event of any eventuality, in which a non-resident account holder becomes the sole owner of the account, it will be classified as a Non-Resident Ordinary Rupee (NRO) account.
- Non-resident account holders will be responsible for keeping AD Bank informed of the status of their accounts so that they can be classified as NRO accounts, and all applicable regulations will apply.
- The joint account holder facility can be extended to all types of resident accounts, including savings bank accounts.
NRE/NRO Joint Account with Resident Indian:
This is also Permitted by RBI, in both NRE and NRO account Structures.
NRIs/ PIOs can have a joint account with a Resident Indian relative on a ‘former or survivor’ basis (relative as defined in Companies Act, 2013). Former or survivor basis means that the second holder of the account ( Resident Indian as we are discussing) will not be allowed to operate the account during the lifetime of the NRI/PIO account holder.
However, The resident relative can operate the account as a Power of Attorney holder (Even if the relative is not the joint holder)
This is a regular process in banks, and they ask the primary holder if they want to give Power of attorney to any relative to operate the account.
Operations by Power of Attorney:
If the non-resident account holder grants a Power of Attorney or other authority to a resident, those operations may be permitted, provided such operations are restricted to withdrawing funds for local payments or making payments to the non-resident account holder himself through the financial system. (Read a detailed article on Power of Attorney and its benefits for NRIs)
Whenever the account holder or a bank he designates is eligible to make investments in India, the Power of Attorney holder may be allowed by authorized dealers or banks to operate the account to facilitate such investments.
Resident Power of Attorney holders is, however, prohibited from repatriating outside India funds held in the account except to the account holder himself, nor from making gift payments to a resident on behalf of the account holder nor from transferring funds from the account to another NRE. (Also Read: Why is it important to file form 15CA & 15CB while repatriating money outside India?)
Power of attorney holders in NRO accounts are also allowed to operate in a restricted manner. They are allowed only to make:
- All local payments in rupees including payments for eligible investments subject to compliance with relevant regulations made by the Reserve Bank; and
- Remittance outside India of current income in India of the non-resident individual account holder, net of applicable taxes.
Joint holding with NRIs in Mutual Funds:
This is allowed with no restriction on operations. Though NRI joint holders have to follow the KYC and Fatca Rules and submit necessary documents as asked by specific AMC.
The Rules may be different in some specific cases like US NRIs. One AMC told me that if the joint holder is US NRI then along with a few additional Documentation, that specific folio be tagged as of US NRI with the internal Restrictions. (Also Read: Mutual funds taxation – How it is Different for NRIs?)
NRI Joint Account with Resident- Conclusion:
Joint holding is an important and useful facility provided in financial accounts. It does not make the second holder the owner of the Investment or bank balance, neither the tax liability is shared by the second holder, but from the operation point of view it becomes easy.
Though it’s a personal choice and requirement of the NRI to have the Joint account with Resident Indian or not, it’s wise to have one, especially after a specific age. NRIs can also have a joint account with another NRI/PIO and Resident Indians can have a joint account with another Resident Indian too. (Also Read: What is OCI Status and New OCI Rules)
But just in case you don’t have any close relatives in the same country then joint holding with NRIs and vice versa is also open.