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Why Should NRIs Convert Savings Accounts to NRO Accounts?

The Foreign Exchange Management Act (FEMA) guidelines specifically state that an NRI can’t hold a savings account in his or her name in India. As an NRI, you have to convert your savings account in India to a Non-Resident Ordinary (NRO) account.

What is an NRO account?

An NRO account is akin to a savings account for NRIs. NRIs maintain this account to manage income that they earn in India. So, as an NRI, you can deposit INR earnings here, as well as funds from abroad in foreign currencies that are convertible freely. Through this account, you can also pay loan EMIs and insurance premiums taken in India.

Repatriation is also allowed from this account to an account abroad. However, there is a ceiling. You can repatriate up to $1 million every year. Repatriation is possible after clearing all tax dues.

What is the need to convert from savings to NRO?

After becoming an NRI, you can’t continue to maintain your resident savings account. You need to inform the bank about your changed status within a reasonable timespan (generally accepted as three months).

The Reserve Bank of India (RBI) has categorically mentioned this need. It says that whenever an Indian goes abroad (except to Nepal and Bhutan) for employment, business, vocation, or any other purpose for an uncertain period, his/her existing savings account is designated as an NRO account.

Thus, it is illegal to maintain the savings account in its original form after you have become an NRI. It can attract heavy penalties and other similar actions.

How to convert this account to NRO?

The process is fairly simple. Designated forms for this purpose are available at the physical branches of the concerned bank. You can also access the forms online. All account holders need to sign this form. If there are any Fixed Deposits (FDs) linked with this account, you would need to submit the receipt for the same, too.

Documents required

  • Copy of the passport
  • Copy of the valid visa/work permit
  • Proof of address abroad
  • Two photographs

You might need to get these documents attested by the Indian Consulate/Embassy in your country of residence. You would need to confirm this with the concerned bank.

Are there any penalties for not converting to an NRO account?

As per Section 13 of FEMA, 1999, if anyone contravenes this rule, he or she can be penalized to the extent of three times the amount involved in such contravention. If the amount is not quantifiable, then the penalty would be up to ₹2 lakhs. Thereafter, it might extend up to ₹5,000 per day.

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