Any Indian citizen can’t operate a bank account in India after receiving the non-resident Indian (NRI) status. When it comes to operating a bank account for financial transactions in India, NRIs need to follow certain rules. As per existing laws, NRIs are not permitted to operate a bank account in India similar to the resident Indians.
The NRIs are needed to open an non-resident ordinary (NRO) account in India to continue with their financial transactions in the country after a change in their resident status.
Can NRIs continue with their resident savings account in India?
Though most NRIs continue with their resident savings account in India, it is against the law. This means that it is “illegal” to hold a resident savings account after getting an NRI status. As per the law, the NRIs are mandated to convert their resident savings account to an NRO account to continue their financial transactions in India.
If they continue to operate their savings account without converting it to an NRO account, it will attract a penalty.
What is an NRO account?
A non-resident ordinary (NRO) account refers to a rupee-denominated account, which can be used by NRIs to manage the income they generate in India and related financial transactions. It is suggested that they ask their bank to convert their resident savings account to an NRO account within a reasonable time-frame.
The NRO account can be opened in the form of current, savings, recurring or fixed deposit accounts, according to the Reserve Bank of India guidelines.
However, one thing to note is that the interest generated via such accounts is taxable. Income receivables in India, including rent from leased out property, profit from investments and monthly pensions, among others can be managed through NRO accounts. In addition, if they are supposed to pay for EMIs of loans or insurance premiums, the transactions should be carried out using the NRO accounts.
How to convert an existing savings account to an NRO account
· The NRIs need to file a form with their bank to convert the resident savings account to NRO account.
· The applicant needs to submit the KYC details, including the new overseas address, contact details, passport/visa details and OCI/PIO card, among others.
· If it’s a joint account the form should have the signature of all account holders.
· The self-attested form along with the photocopies of the documents attested from the Indian Embassy or Consulate should be submitted with the bank.
· After receiving the application with documents, the bank will complete verification and convert the savings account to the NRO account.