Impact of Residential Status Changes on NRI Accounts

Change in NRI Residential Status Has an Impact on NRI Accounts

Let’s examine the various NRI accounts and the necessary action when residential status changes –

1) Bank Accounts

1. Resident Indian to Non-Resident Indian

NRIs are not permitted to maintain savings accounts in India. To deposit their earnings, NRIs can open an NRE or NRO account.

An NRE account may be established as a savings account or a time deposit. A resident Indian can be added to a joint bank account. Transferring funds from the NRE account to the NRO account is possible. In NRE accounts, only foreign income can be deposited. The interest earned on this account is exempt from taxation.

An NRO account may be launched as either a savings or term deposit account. A resident Indian is eligible to possess a joint account. Only Indian income can be deposited into this account. This account’s interest income is taxable.

NRIs are required to convert resident fixed deposits into NRO deposits.

NRIs can establish FCNR accounts for term deposits. Deposits are only accepted in foreign currency. Interest and principal are exempt from taxation. Resident Indians are ineligible for joint ownership of this account.

Procedure – Visit the bank branch, complete out the necessary forms, and submit them along with your identity proof documentation, your passport, and your visa.

2. NRI to Resident Indian

NRE and NRO savings must be converted to resident savings accounts. NRIs may convert their savings accounts to RFC accounts until their residency status changes to RNOR.

The status of fixed deposits in FCNR and NRE accounts can remain unchanged until maturity. After maturity, they can be converted to Resident Foreign Currency(RFC) accounts.

Procedure – The NRI must provide a declaration to convert an NRE/NRO account to a Resident Savings account. Details such as customer identification number, account number, etc. must be filled out, signed, and submitted at the local bank branch.

2) Demat Account

1. Resident Indian to Non-Resident Indian

NRIs are required to terminate the Demat account they held while residing in India. A new Demat account or Portfolio Investment Scheme (PINS) account must be opened Blog 3 with a bank. Using this account, they can acquire and sell stocks. The proceeds from sales may be remitted to the NRE savings account.

An NRI is limited to one PINS account.

Procedure – The status change must be communicated to both the authorized dealer and the depository participants.

2. NRI to Resident Indian

NRIs cannot maintain their NRI Demat account once they become Indian residents. They must establish a resident Demat account and transfer all existing investments to that account.

While you were a resident Indian, the account must be closed and the shares must be transferred to an NRO Demat account. You have the option of keeping these shares in your NRO Demat account or selling them. The proceeds from their sale are deposited into the NRO savings account.

To purchase shares on the secondary market as a Non-resident Indian, you must establish a Portfolio Investment Scheme Account with a bank. In this scheme, you can purchase shares with funds from your NRE account, and the proceeds from the transaction can be credited to your NRE account for repatriation.

Procedure – The status change must be communicated to both the authorized dealer and the depository participants.

3) Mutual Funds

1. Resident Indians to Non-Resident Indians

The mutual funds can be held after a change in residency status.

Procedure – The NRI must send a letter to each AMC along with evidence of NRI bank accounts, KYC documents, passport, and proof of overseas address.

2. NRI to Indian Resident

The units of the mutual fund can be held even if the resident status changes.

Procedure – Write a letter to individual AMCs with your folio number indicating your change of status from NRI to Resident and enclosing cancelled cheques from your previous NRE/NRO account and your new resident account.

4) PPF Account

1. Resident Indian to Non-Resident Indian

An NRI is ineligible to establish a PPF account. However, if he opened a PPF account while he was an resident Indian, he can maintain that account until its maturity.

Procedure – He can invest the amount using funds from NRE or NRO accounts as a Non-resident Indian. If he wishes to terminate the account, he can do so with the withdrawal form and attestation from the bank where the NRE/NRO account is located.

2. NRI to Resident Indian

Procedure – The Non-resident Indian must invest funds from a resident savings account.

If he wishes to terminate the account, he must submit the withdrawal form along with any other relevant documents.

5) NPS Account

1. Resident Indian to Non-Resident Indian

When a Resident Indian beccomes NRI, the account with the NPS must be closed. As an NRI, he is able to create a second NPS account. He may only have one NPS account.

Procedure: There are two options – If he has an Aadhaar or PAN card, he can establish the account using eNPS. It is possible via the eNPS website.

The NRI NPS form can be downloaded, filled out, and submitted to the bank branch.

The funds must be transferred through the NRE/NRO account.

2. Non-Resident Indian to Resident Indian

NRIs must terminate the NPS account they created while living abroad. When they become resident Indians, they can establish a new NPS account. The NPS account cannot be transferred upon a change of citizenship.

Procedure: There are two options –

If he has Aadhaar or a PAN card, he can establish the account through eNPS. It is possible via the eNPS website.

The NRI NPS form can be downloaded, filled out, and submitted to the bank branch.

The amount must be transferred through the resident’s savings account.

6) Insurance

1. Resident Indian to Non-Resident Indian

When you become a Non-Resident Indian, a policy purchased while you were a Resident Indian will remain valid. You must comprehend the claim rules and procedure for the status modification. You must inform the organization of your new residency status.

2. NRI to Resident Indian

Life insurance policies purchased abroad can be maintained by Non-resident Indians. As NRIs, they can also maintain the policies they purchased in India. They are required to notify the organization of any changes to their residency status.