SNRR vs. NRO Account

SNRR vs. NRO Account

An RBI notification dated October 4, 2019, brought about some significant changes to the terms and conditions related to the Special Non-Resident Rupee (SNRR) Account. And that has been a hot topic of discussion for NRIs.

But, are you wondering about what exactly is this SNRR account? Or are you baffled by questions like “Do I need an SNRR account?” or “How exactly is it different from an NRO account?”

If yes, then we have a solution for you.

Let us first discuss the difference between an SNRR and an NRO account.

Who can open these accounts?

An NRO account can be opened by anyone of Indian origin residing outside India. This account can be opened to carry out bona fide transactions in rupees.

The SNRR account, on the other hand, can be opened by anyone of Indian origin residing outside India, who has a business interest in India. This account is opened to carry out bona fide business transactions.

This, in essence, means that the NRO account is for all NRIs, and the SNRR is only for those NRIs who have business interests vested in India.

If you don’t have a business interest in India, there is no need for you to open an SNRR account. And you can safely ignore the buzz about the recent changes to the scope of the SNRR account.

Are you entitled to interest on the balance in these accounts?

The SNRR account is a non-interest-bearing account. You are not entitled to any interest on the balance in such an account.

In your NRO account, however, interest accrues based on the guidelines of the Department of Regulation.

What transactions can be made?

The following debit and credit transactions can be carried out through the NRO account:

Debit transactions:

  • Local payments
  • Transfers to other NRO accounts
  • Settling charges on international credit cards
  • Remittance of current income (according to the regulations)

Credit transactions:

  • Any legitimate inward remittance and dues receivable (should be in accordance with FEMA, 1999)
  • Transfers from other NRO accounts

The SNRR account can be used for transactions incidental to the business that the account holder is involved in.

This means that the SNRR account is strictly for business purposes, as stated during the opening of the account.

Via a bi-monthly statement issued on the Statement on Developmental and Regulatory Policies, on October 13, 2019, the RBI allowed the opening of the SNRR account for the following purposes, as well:

  • Trade credit
  • Trade invoicing
  • Rupee-denominated ECB (External Commercial Borrowing)

Are the accounts repatriable?

The NRO account is a non-repatriable account, except for current income. NRIs are permitted to remit an amount less than or equal to $1 million in a financial year (April through March). These remittances should be in consideration with the regulations of FEMA.

When it comes to the SNRR account, it is a completely repatriable account.

Is there a specific tenure for the operation of these accounts?

The NRO account has no specific tenure.

In the case of an SNRR account, there are certain time-based restrictions.

The account’s tenure should be concurrent with the contract or time period of the business for which the account was opened. And this tenure cannot be more than seven years.

Earlier, there was no way account holders could apply for a renewal or extension of the account. After the 2019 amendments, for an extension or renewal of the account, approval applications can be submitted to the RBI.

This rule didn’t, however, apply to SNRR accounts opened for the purpose of investing in India in accordance with FEMR, 2017.

After the enhancements in scope for the SNRR account, now, the seven-year limit doesn’t apply to the accounts opened for purposes as specified under the subparagraph (i) to (v) of the first paragraph of FEMA 5(R) Schedule 4.

So, now that you know what exactly an SNRR account is and how it differs from the NRO account, we hope you’d be able to understand the repercussions that the changes bear for you.

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