When an Indian citizen attains Non-Resident Indian or NRI status, he/she can’t hold the resident bank account for a long duration. It is mandatory by law to convert a resident account into an NRI bank account. If you continue to operate a resident account for a long time after a change in your resident status, you will be liable to pay a penalty for not converting to NRO account. You will need to complete some formalities and submit documents for converting a resident account into an NRI account. Here we will discuss, how to convert a resident account to NRO accounts.
Apply for NRO Account
NRIs can open two types of NRI accounts – NRE and NRO accounts – based on repatriable (NRE) and non-repatriable (NRO) basis. However, you can only convert a resident bank account to an NRO account. It is because funds can’t be transferred from the resident bank account to an NRE account. To convert the resident account to an NRE account, you will have to close the account and open a new NRE account.
Some of the best NRE accounts include Axis NRE account, IDFC NRE account, Yes Bank NRE account, and many more.
Also Read: NRE VS NRO: Selecting the Right Bank Account for NRIs
Can NRI Continue with Resident Savings Account?
No, it is not possible for NRIs to continue using a resident savings account. Once their status changes from resident to NRI, they are no longer allowed to operate a resident account. According to RBI regulations, it is obligatory for NRIs to open an NRI bank account in order to carry out financial transactions in India. if NRIs continue using their resident account, then they will have to pay the penalty amount.
How to convert resident account to NRO account
Following are the steps to convert resident savings account to an NRO savings account:
- Contact the bank where you have your resident savings account and request for conversion from a resident account to the NRO account.
- Fill in the conversion of resident savings account to NRO account form. You will have to write KYC details including details of your new address (overseas), point of contact, visa details, OCI/ PIO card, etc.
- Get the form signed by all the account holders.
- Collect photocopies of all supporting documents – visa/ work permit, OCI/ PIO card, passport copy, etc.
- Self-attest and get the form and photocopies of documents attested from the Indian embassy/ notary public/ consulate/ overseas branch of a nationalized Indian bank.
- If any FD is associated with the account, attach the receipts.
- Send the form along with documents to the bank address.
- If you are in India, you can visit your bank to complete all formalities.
- After receiving the form and documents, the bank will complete the verification and convert the resident account to the NRO savings account.
Document required for converting the resident account to NRO savings account
Here is the checklist of documents required to convert a resident bank account to an NRO savings account:
- FATCA Declaration Form
- FEMA Declaration Form
- Declaration of P.O. Box (for NRIs in the UAE)
- Resident bank account closure form
- NRI bank application form
- Copy of PAN Card
- Identity proof: Passport/ Aadhaar card/ voter’s ID card/ driving license, etc.
- NRI status proof: Valid visa/ work permit/ OCI/ PIO card, etc.
- Foreign address proof: Utility bills (latest electricity/ water/ telephone bill)
- Passport size photographs
All the documents should be attested by the competent authority.
Time Limit for Converting to NRO Account
There is no specific limit for converting a resident account to an NRO account. However, once your status changes to the Non-Resident Indian from a resident Indian as per the FEMA (Foreign Exchange Management Act), you need to convert your resident account to an NRO account for your transactional needs in India.
NRO account details post conversion
Once a resident savings bank account is converted to an NRO account, some details remain the same and some change as under:
- The account number will remain the same.
- Funds from the savings account to the NRO account will be transferred automatically.
- The cheque book will be the same.
- Netbanking login ID and password will remain the same.
- A new debit card will be issued with NRI status.
Also Read: Top 9 NRO Account Benefits: Updated 2021
Penalty for not converting to NRO account
When the resident status of an Indian citizen changes to NRI, he/she can’t hold the resident savings bank account and needs to convert it into an NRO account as there is a penalty for not converting to NRO account. As per the Foreign Exchange Management Act (FEMA), continuing with the resident account is illegal for NRIs.
As per Section 13 of FEMA, 1999, if anyone violates the act, a penalty up to 3 times the amount involved in it or Rs. 2 lakh (if the sum is not quantifiable) will be charged. Moreover, the account holder will be liable to pay a penalty of Rs. 5,000 every day from the first day of violation until the penalty is paid.
So, NRIs must convert the resident bank account to an NRO account as soon as they attain NRI status. Otherwise, they may get in legal trouble and have to pay heavy penalties.
Points to consider when converting your resident savings account to an NRO savings account
Below listed are the points you will have to keep in mind when converting your resident account to an NRO account:
- Resident account to NRO savings account conversion charges levied will vary from bank to bank. For example, no charges are levied for converting a resident SBI bank account to SBI NRO account.
- The interest earned in the NRO account can be repatriated after the deduction of taxes.
- NRI customers are required to provide proof of foreign address at the time of application.
- Income earned in India can be deposited in the NRO account in INR.
- Taxes will be applicable on NRO deposits.
How to Convert SBI Account to NRO Account?
To convert your SBI savings account into an NRO account, you should follow the steps outlined below:
- Provide evidence of your NRI status, such as your passport, visa, and proof of address in the foreign country.
- Complete the NRO account conversion form and submit it to the SBI branch where your savings account is held.
- Provide the relevant bank details for your NRO account.
- After completing the necessary formalities and obtaining the required approvals, your SBI savings account will be converted into an NRO account.
Please keep in mind that charges or fees may be applicable during the conversion process. It is recommended to verify the precise fees and procedures with the bank directly.
What is an NRO Account?
NRO stands for Non-Resident Ordinary account. It is a type of bank account opened by Non-Resident Indians (NRIs) or Person of Indian Origin (PIOs) with Indian banks. An NRO account is used to manage the income earned by an NRI in India, such as rent, dividends, and other investments. It allows NRIs to deposit and manage their Indian income in Indian rupees.
Can I Transfer Money from Normal Savings Account to NRO Account
Yes, it is possible to transfer money from a normal savings account to an NRO (Non-Resident Ordinary) account.
Benefits of NRO Account
Given below are some of the benefits of an NRO Account:
- An NRO account enables NRIs to easily manage and receive income earned in India, such as rental income, dividends, and interest on investments.
- It allows NRIs to conveniently transact in Indian rupees for their expenses, such as payments for bills, mortgages, and other financial obligations in India.
- An NRO account offers NRIs access to a wide range of investment opportunities in India, including stocks, mutual funds, and fixed deposits on a non-repatriable basis.
- NRIs can open a joint NRO account with a resident Indian, which can be useful in managing financial matters in India.
- You can link your NRO Account to a PIS Account and trade in Indian stocks listed on a recognized stock exchange.
Due to lots of information and documentation required to apply for NRI accounts, NRI account opening process is lengthy and cumbersome elsewhere. Whether you want to open a new NRE/ NRO account or convert your resident account to an NRO account, you can apply for NRI accounts online through SBNRI. Download SBNRI App to apply for online NRI account in India with nominal documentation in just 10 minutes.
You can also click on the button below to apply for an NRI account. Visit our blog and YouTube Channel for more details.
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FAQs
Can NRI continue with resident savings account?
No, NRIs can’t continue with a resident savings account. Once your resident status changes to NRI, you can’t operate a resident account. As per the RBI, it’s mandatory for NRIs to open an NRI bank account to conduct financial transactions in India.
Can I transfer money from normal savings account to NRO account?
Yes, you can transfer money from a normal resident account to NRO account. Funds in a resident account are automatically transferred to an NRO account.
How to convert a resident account to NRE bank account?
You can’t convert your savings account to NRE account as you are not allowed to transfer funds from the resident account to an NRE account as per the RBI guidelines.
However, you can close the resident account and open a new NRE bank account. You will have to withdraw funds from your resident account or transfer them to another resident/ NRO account.
What is the penalty for not converting a resident account to NRO account?
As per the FEMA regulations, an NRI will be liable to pay up to 3 times the amount involved in it or Rs. 2 lakh (if the amount is not quantifiable) for not converting a resident account to an NRO account. Moreover, a daily penalty of Rs. 5,000 will be levied from the 1st day of violation of rules.
Should I convert my account to NRO account?
As per the Foreign Exchange Management Act (FEMA) guidelines, it is illegal to operate a resident account once your resident status changes to NRI. If you continue with your resident account, you will be liable to pay a penalty of up to 3 times the amount in your resident account or Rs. 2 lakh when the sum is not quantifiable.
Is it mandatory to convert a resident account to an NRO account?
Yes. It depends on whether you want to close the resident account and open a new NRE or NRO account, or convert the existing resident account to an NRO account. As per the FEMA guidelines, an NRI can’t hold a resident account; there is a penalty if you operate the regular account after change in your state of residence.
Can I convert my savings account to the NRE bank account?
No, you are not allowed to convert your resident account to an NRE bank account, because funds in a resident account can’t be transferred to an NRE account as per RBI guidelines. However, you can convert a resident account to an NRO bank account.
To open an NRE account, you need to close the existing resident account. If there is money in the resident account, withdraw it and close the account.
What is the penalty for not converting to NRO account?
According to the guidelines of the Foreign Exchange Management Act (FEMA), it is illegal for NRIs to continue holding their resident savings account, and doing so may result in severe penalties. The Act stipulates that individuals who do not comply with these regulations may be liable to pay a fine of up to three times the amount involved in the resident savings account or Rs. 2 lakh if the amount is not quantifiable. Furthermore, a daily penalty of Rs. 5,000 may be charged from the day of intervention until the fine is paid
Can I transfer money to NRO account from India?
Yes, you can transfer money to an NRO account from India. As an NRO account is a regular bank account, you can transfer money to it from other Indian bank accounts, such as a resident savings account or another NRO account.
It is important to note that there are certain restrictions on the repatriation of funds from an NRO account to a foreign bank account, as the funds in an NRO account are non-repatriable without the prior approval of the RBI.
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