Do NRIs Need to Have an NRE/NRO Account to Send Money to India?

As an NRI, do I need an NRE/NRO account to send money to India?

Do NRIs need to convert resident savings account to NRO NRE accountCan NRI hold a savings account in India?

Am I required to convert my resident savings account to NRI bank account once I move abroad?

Is there a penalty for not converting resident Indian savings account to NRO account?

In this post, I am going to answer these questions around what’s wrong with holding your savings account in India once your status changes to NRI.

Let’s dive right in.

Once you have stayed out of India for more than 182 days during the preceding financial year, your status changes from a Resident Indian to an NRI [Non-Resident Indian]. That’s when you lose certain privileges that a resident Indian has, and holding domestic savings bank account back in India is one of them.

Once you become an NRI, you can no longer keep a resident bank account and are required by law to convert your resident savings account to NRO or NRE.

It is your responsibility to inform your bank to convert your savings account to NRO account. Chances are, you didn’t even know such a requirement existed to change your resident domestic savings bank account to one of the NRI accounts after you have been outside India for more than six months.

Can you send money to India without an NRI account?

You might be wondering:

But I send money to my savings account without any issues.

Well, once you become an NRI and do not convert your Indian saving account to an NRI category (NRO/NRE), technically nothing is stopping you from making the transfer.

You can initiate the transfer using your preferred channel, and the money WILL reach your bank account in India.

BUT, there’s a problem…

In the eye’s of the government of India, that’s not legal.

Let me explain.

The rules, interest rates and legalities that apply to NRI accounts are different to the bank account you hold as a resident Indian. You need to maintain an account as per your residency status.

If you come under the radar leading to an inquiry, you cannot just say “nobody told me this” and will have to face the consequences.

Related: The ultimate guide to sending money to India

Is it illegal if you don’t convert Savings account to NRI account?

Yes.

As I already mentioned, the moment your status changes to NRI, many rules and regulations change for you from a personal finance point of view as compared to when you were a resident Indian.

As per FEMA (Foreign Exchange Management Act, 1999) regulations, it is illegal for an NRI to hold resident savings account in India.

If authorities notice, you could face a penalty for not converting to NRO account, and operating a savings account in India with NRI status (stayed out of India for more than 182 days).

Related: When is the best time to send money to India?

Unaware that holding a savings account is illegal for NRIs as per Indian laws, most people who have travelled to the UK for work ignore this.

They continue with resident savings accounts to send money to India from overseas even after the six month period expires thinking it doesn’t matter.

That’s a mistake!

Even I didn’t know about this requirement at the start.

However, as soon as I came to know of this law, I straight away switched my Indian savings account to NRO account to deposit any earnings in India.

NRO or NRE – which account is right for you?

This question is for a separate post. But I will try to explain it very briefly here and then do an elaborate post on whether to choose NRO or NRE account later.

In plain terms, NRO account is to deposit your INR income in India. If you have any income in India like from rental property, the stock market, dividend or any other investments, you need an NRO account.

Any payments towards insurance premiums, EMIs for loans you took while in India should also be paid using NRO account. You can send money from UK to India to an NRO account without any issues as long as all taxes due are paid in the UK.

NRE account is only to deposit earnings from employment overseas.

With an NRO account, you can repatriate up to an equivalent of 1 Million USD per year from India to your resident country abroad, given you fulfil the required formalities. Like, you need to get a certification from a CA for taxes paid on your income in India.

For NRIs with an NRE account, there is no such limit.

In addition to an NRO account, I hold a separate NRE account that allows me to transfer my overseas income from UK to India with an option to repatriate the money back to the UK without any restrictions, if I may need to in the future.

I will do a detailed post here about the differences between NRO and NRE accounts.


Most of my friends who I spoke to about this, didn’t know there was any such requirement after moving abroad. They never bothered converting resident savings to NRO/NRE account.

When I told them about this being illegal, many of them took action right away not to end up getting penalised in the future. That’s when I realised a wider audience should be made aware of the law, and I wrote this post (you can do your part by sharing it!).

Convert your savings account to NRO account now to avoid getting penalised

What next?

Take action!

I can’t emphasise this enough:

If you are an NRI residing outside India and operating resident savings account back home, I recommend you convert your home account to NRO account right now.

How to convert your Indian savings account to NRE/NRO

I converted my savings accounts to NRI status and it didn’t take much of my time.

Here are your options to comply with the Indian law:

1. Convert existing savings account to NRO account

To convert savings account to NRO account, contact your bank to make the changes. The bank will change your status on the account, and your account number stays the same. If you opt for this option, you don’t have to worry about changing your account number if you pay any monthly EMI/SIP etc.

2. Open a new NRO account

You can also close the savings account with your current bank and open a new NRO account with a different bank in case you decide to change your bank (in which case you will have a new account number for your NRO account). With this option, because you will have a new NRO account number, you will need to inform the respective banks/companies about your new account number.

3. Open an NRE account

If you have no income in India to be deposited, you can simply just close your savings bank account and open a new NRE account. To open a new NRE account, you can contact the bank you want to open an account with by calling them, or you can do it online. Most of the banks have online application portals which you can access for more details on the process.

Remember: you can take up option 3 in addition to option 1 or option 2.

In my case, I went with option 1 and 3 as I mentioned in NRO vs NRE section above.

Summary

I hope it’s now clear that you do need to convert your resident savings account to NRO account or open a new NRE account to satisfy Indian law for NRIs.

If you have any queries or suggestions to add to this topic, please do write in the comments section below.

And if you found this post helpful, again don’t forget to share this with your friends, family members and anyone you think this information could help.

Aman

Aman is the founder and chief curator of Comparism. He loves to write how-to guides and via comparism, he envisions to bring to you the best ways of sending money to India without paying hefty fees in hidden charges and poor conversion rates.

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4 Responses

  1. KIRTI SHETTY says:

    I came to USA ,post marriage in april 2015. but i have still not converted my saving account into NRO account.I have not transferred any funds from USA .
    but am planning to go to india by this year end and will get the saving account converted to NRO. But my question is, in the bank form i need to inform them that my status changed in end of 2015,that is almost 2 years back. Will that raise any query from the authorities.
    Currently am using the saving account only for monthly sip payments and receive dividend and interest income which is nominal. Am also filing IT return with NRI status , though i do not have any taxable income in india except for interest ,below taxable limit.

    • Hello Kirti, thanks for dropping by.

      What I would recommend is to check with an official when you are in the bank to seek their advice. If I were you, I would just put the true information in there. There shouldn’t be any major issues but I again recommend to convert the account as soon as you can. Living outside India and depositing income from India into a resident account is not OK with the taxman.

      If possible, do come back and update your experience here based on which I will update the article. Even I need to sort out the status on one of my accounts and I will update that information here.

      All the best,
      Aman

  2. Ganeshbaabu says:

    The situation is same for my son as for Mr. Kirti Shetty. He went in Aug 2015 to US and not converted domestic savings account. Please clarify:
    1. what penalty we will get for not converting.
    2. which is better – to open NRE/NRO in the same bank or different bank.
    3. He is sending money to meet parents expenses and for his education loan. The education loan is paid from my savings account (different bank) as mandated by loan provider. The money gets from his domestic account to my account and then to loan provider.

    Thanks in advance.

    • Aman says:

      Hello Ganeshbaabu,

      Thanks for your comment. I hope the below information helps.

      1. As per the query answered on this article by Tribune,

      There is no specific penalty provided for not converting an ordinary saving account into a non-resident ordinary account. However, Section 13 of the Foreign Exchange Management Act, 1999 provides that if any person contravenes any provision of this Act or contravenes any rule, regulation, notification, direction or order issued in exercise of the powers under this Act, or contravenes any condition subject to which an authorisation is issued by the RBI, he shall, upon adjudication, be liable to a penalty up to thrice the sum involved in such contravention where such amount is quantifiable, or up to Rs 2 lakh where the amount is not quantifiable. Where such contravention is a continuing one, a further penalty that may extend to Rs 5,000 for every day after the first day during which the contravention continues. It is, therefore, desirable that an account should be converted into an NRO account without delay.

      2. It is totally your choice – I personally have both my NRE/NRO with the same bank. Doing this would save you some admin in managing your accounts.

      Cheers, Aman.

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