As soon as your domicile status changes to NRI, numerous personal finance rules and regulations become applicable to you or are altered. From your bank accounts to any properties you may own, everything has a unique status. The majority of individuals tend to disregard some of them, unaware that they are unlawful and carry penalties.
Here are some of the questions that are being asked by the NRIs:
Can NRIs Have Savings Accounts in India?
Most individuals make the error of maintaining a resident savings account after becoming an NRI, which is prohibited by law. Or, it is ILLEGAL for NRIs to maintain resident savings bank accounts. When your status changes to NRI, your resident savings account must be converted to an NRO account as per FEMA regulation.
An NRO account, also referred to as a Non-Resident Ordinary account, is a rupee-denominated account that Non-Resident Indians (NRIs) can open to administer their Indian-earned income. This account can also be used to transfer rupees or funds originating from India. This account’s interest income is taxable in India.
All income earned in India must be deposited into this account, as well as any insurance premiums or monthly instalments on loans taken out in India. You must notify your bank of the status change within a reasonable time frame. Your payments will continue as usual after the bank assigns your resident account to the NRO accounts.
Remember that if you continue to maintain an NRI savings account and it is discovered, you will be penalised. You can now withdraw up to $1 million from your NRO account, but only if you have obtained a certificate from a Chartered Accountant stating that you have paid all applicable taxes on your income in India.
To deposit funds from abroad, one must have an NRE account, which allows unlimited repatriation of funds to the country of residence. NRIs cannot transfer money to their savings account in India. If it’s their friend’s or family members’ account then yes they can. However, they must ensure that you comply with the regulations set by the Reserve Bank of India (RBI) for such transactions.
Learn More – Different Types of NRI Accounts
Are There Penalties for Not Converting to NRO Account?
According to some NRIs, few bankers recommend sustaining the status quo on a resident savings account, but if you incur a liability, they will not be able to assist you. Sincerely, I have never met an NRI who was punished for having an Indian savings account. But why would you want to take a risk when you can simply follow the rules and be at ease?
Can NRIs Open a PPF Account in India?
Non-Resident Indians cannot establish a PPF account. However, the existing account regulations are the least clear. Since 2003, if you opened a PPF account as a resident Indian and then became a non-resident Indian, you are permitted to maintain your PPF. Contributions can be made from NRE or NRO accounts. The funds must be withdrawn upon maturity, as extensions are not permitted, and the proceeds will be deposited into the NRO accounts.
What Should You Do When You Become an NRI?
If you have recently obtained NRI status, these are the first steps you should take:
- Inform your bank of your changed status. Contact your branch for assistance with the required documentation for your new accounts.
- Re-verify your KYC and adjust your accounts for your investments.
- Reissue the cheques from a new account for all of your assets and obligations. If it is an automatic debit, the bank mandate should be changed to NRO or NRE accounts.
NRIs cannot maintain their resident savings account in India and are required to convert it to an NRO account. Noncompliance with the regulations and failure to convert to an NRO account may result in penalties and legal repercussions, so it is essential for NRIs to take the necessary steps to avoid complications. In short, an NRI cannot hold a resident savings account in India.