Someone rightly said “Change is the only constant in life” but few changes are really tough like the change inresidential status for NRIs.
Are you an NRI who is planning to return to India? Or are you a resident Indian who will become an NRI?
Either way, there are certain steps to be taken regarding financial matters. You need to take care of your Demat, Bank account, MFs, etc. to ensure that the type of account that you operate matches your residency status.
Must Read – Can NRI Continue With Resident Savings Account?
NRI Change in Residential Status Affects NRI Accounts
Let us look at different NRI accounts and the action to be taken when residential status changes –
Bank Accounts
Resident Indian to NRI
NRIs cannot hold normal savings accounts in India. NRIs can open an NRE or NRO account to deposit their earnings.
An NRE account can be opened as a savings or a term deposit account. A resident Indian can be made a joint account holder. Funds from the NRE account can be transferred to the NRO account. Only foreign income can be deposited in NRE accounts. Interest earned in this account is tax-free.
An NRO account can be opened as a savings account or a term deposit account. A resident Indian can be a joint account holder. Only income from India can be deposited in this account. Interest earned in this account is taxable.
NRIs have to convert their resident fixed deposits to NRO deposits.
NRIs can open FCNR accounts to have term deposits. Deposits can be made only in foreign currency. Interest and principal amounts are tax-free. Resident Indians cannot be joint holders of this account.
Process – Visit the bank branch and fill the relevant forms and submit them along with identity proof-related documentation, passport, and visa.
Must Read – FCNR account for NRI – Secret Revealed
NRI to Resident Indian
NRIs have to convert the NRE and NRO savings to resident savings accounts. NRIs have the option to convert savings accounts to RFC accounts till the time the residency status is RNOR status.
Fixed deposits in FCNR and NRE accounts can be as-is until the maturity date. They can be changed to Resident Foreign Currency accounts after maturity.
Process – The NRI has to give a declaration to redesignate NRE/NRO account to the Resident Savings account Details like customer id, account number, etc. should be filled up, signed, and submitted at the local branch of the bank.
NRIs can operate resident bank a/c on ‘either or survivor’ basis. wiseNRI
Must Read – Investment Options for NRI in India
Demat Account
Resident Indian to NRI
NRIs have to close the Demat account that they held when they were resident Indians. They have to open a new Demat account or Portfolio Investment Scheme (PINS) account with a bank. They can buy and sell shares using this account. Sales proceeds can be repatriated to the NRE savings account.
An NRI can have only one PINS account.
Process – The authorized dealer and the depository participants must be informed of the status change.
Read – All About Mandate Holder In Bank Account – by NRIs
NRI to Resident Indian
NRIs cannot continue with the NRI Demat account when they become resident Indians. They have to open a resident Demat account and transfer all existing investments to it.
While you were a resident Indian, will have to be closed and you would need to transfer the shares to an NRO Demat account. You can continue to hold these shares in the NRO Demat account or sell them. If you sell them, the proceeds are credited to the NRO savings account.
If you want to buy shares from the secondary market as an NRI, you would need to open a Portfolio Investment Scheme Account with a bank. In this scheme, you can buy shares with funds in your NRE account and sale proceeds can be credited to your NRE account for repatriation.
Process – The authorized dealer and the depository participants must be informed of the status change.
Must Check this List – Wealth Planning Checklist for NRIs
Mutual Funds
Resident Indian to NRI
The mutual funds can be held when the resident status changes.
Process – The NRI should write a letter to individual AMCs along with proof of NRI bank accounts, KYC documents, passport, overseas address proof.
NRI to Resident Indian
The mutual fund units can be held when the resident status changes.
Process – Write a letter to individual AMCs with folio no stating your change of Status from NRI to Resident individual and attach the canceled cheques of your old NRE/NRO and the new resident account.
PPF Account
Resident Indian to NRI
An NRI cannot open a PPF account. But if he had opened a PPF account when he was a resident Indian, he can hold that account till its maturity.
Process – He can invest the amount in it as An Non-Resident Indian using funds in NRE or NRO accounts.
If he wants to close it, he can use the withdrawal form to do so along with attestation from the bank where the NRE/NRO account is present.
Check – What is RFC Account?
NRI to Resident Indian
Process – The NRI will have to invest money from a Resident savings account.
If he wants to close the account, he will have to fill the withdrawal form along with relevant forms.
NPS Account
Note: NPS detail is purely based on information received from an NRI – if you have some different views please share in the comment section.
Resident Indian to NRI
A Resident Indian will have to close the NPS account when his residency status changes. As an NRI, he can open another NPS account. He can have only one NPS account.
Process – There are two ways –
He can open the account through eNPS if he as an Aadhaar or PAN card. It can be done from the eNPS website.
He can download the NRI NPS form, complete it and submit it to the bank branch.
The amount will have to be remitted through the NRE/NRO account.
NRI to Resident Indian
NRIs have to close the NPS account that they opened as NRIs. They can open a new NPS account when they become resident Indians. The NPS account cannot be transferred when citizenship changes.
Process – There are two ways –
He can open the account through eNPS if he has an Aadhaar or PAN card. It can be done from the eNPS website.
He can download the NRI NPS form, complete it and submit it to the bank branch.
The amount will have to be remitted through the resident savings bank account.
Insurance
Resident Indian to NRI
A policy taken as a Resident Indian will be valid when you become An Non-Resident Indian. You will have to understand the claim rules and procedure for the status change. You have to inform the company about the change in residency status.
NRI to Resident Indian
NRIs can continue with their life insurance policies that have been purchased abroad. They can also continue with the policies they purchased in India as NRIs. They have to inform the company about the change in residency status.
Hope this gives you some idea about the actions that you have to take when your residential status change. If you find any discrepancy or change happened after we published – please add a comment.
If you have any questions related to residential status feel free to ask.
