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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22 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

    • arun says:

      better close that account without saying a word about your nri status and start a new nri account.

      • Aman says:

        Thanks for your comment, Arun. THAT is also an option but doing this would add the hassle of updating all the places where you have your old account number and have any EMIs or SIPs being paid.

  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.

  3. Gaurav says:

    Hi Aman,,

    Thanks for this post. It is really informative. I have one query that I have recently moved out of India for 1 year. I tried to enquire with banks to convert my Savings account to NRO but they told that it can be done only when you have resident permit or valid VISA for another country which I was not having earlier. Need to know that can it be done online.? Also since, its still lessthan 182 days for me outside India, is it safe to do it once I am in India in next 5-6 months.
    Thanks.

    • Aman says:

      Hello Gaurav,

      Thanks 🙂

      You can convert your resident account to an NRO once 182 days have passed.

      To answer your query,

      – No, you cannot do it online – you need to send the filled form and supporting documents (although you can go to your bank’s website and download forms!)
      – Once 182 days have passed, you can send the printed forms and supporting documents to your bank (If you plan to visit India anyways, you can do it there but you don’t necessarily have to be in India and could request NRI status change from overseas too).

      Check with your bank (or on their website) about the process and documents required.

      Hope this helps!

      Cheers

  4. Parin says:

    Do I need an NRE account to just payback my student loan? I don’t intend to save up the money but directly transfer to student loan account.

    • Aman says:

      Hi Parin, thanks for your comment.

      You don’t necessarily need an NRE account for your purpose, I understand. However, you do need to convert your saving account to NRO account to comply with Indian law.

      Hope this helps.

  5. Arun says:

    Hi Aman,
    I have a joint account with my wife. She is staying in India. Will I have to convert this account to NRO?

    • Aman says:

      Hi Arun,

      Thanks for dropping by!

      To answer your query, I presume you have already stayed out of India for more than 182 days and your status is now NRI.

      If the status of the account is Resident Savings account: you are allowed to hold this account jointly with your wife but you can only be on ‘former or survivor’ basis. Such a restriction does not allow the non-resident joint account holder to operate the account during the lifetime of the other primary account holder (in this case your wife).

      If the account is an NRO account: you can hold a joint account with your wife and you can both operate this account.

      So to allow both you and your wife to operate the bank account, you can let your bank know of the status change.

      Please let me know if this answers your query.

  6. Krishna G. says:

    Hi Aman, Firstly a big THANK YOU for sharing this important information. I was under assumption that I can keep the resident status if I don’t transfer any foreign funds and continue to pay my Taxes to Indian IT dept. Any ways I am going to convert my resident account to NRE/NRO at earliest.
    I have few questions for you, hope you will be able to clarify the same.

    1. Will there be any impact to Fixed Deposits and Bank Locker if I convert my Savings account to NRE/NRO?
    2. Currently I am on temporary work Visa (since 18 months) and not sure how long I will be staying abroad. Would it be a complex process to convert my NRE/NRO account to Resident again – once I am back in India for good?
    3. How soon I can initiate the process to convert my NRE/NRO account to Resident account once I am back in India?

    • Aman says:

      Hey Krishna, thanks for dropping by and I am glad you found this helpful.

      The status change to NRO is governed by the period of stay outside India and not by whether you send funds from overseas to India or not. That is what I thought myself long time back and made required changes as soon as I could and thought of sharing with others as many of my friends I spoke to, didn’t know this as well 🙂

      1. No, if you want to keep the FDs/Lockers, you would need to convert to NRO account and that would not change your account number. This means you won’t have to update any companies who you pay on a monthly basis (EMI/SIP etc). Please note you cannot convert your resident account to an NRE. NRE is to be opened separately if you want to!

      2. As I understand, the process is similar to convert your NRO account back to resident status.

      3. It’s the same rule as per my understanding; once you are in India for 180+ days in any financial year, your status changes back to Resident Indian. That is when you can request to change your account status from NRO to Resident Savings Account.

      I hope this information helps.

      Cheers!

  7. Savithri says:

    I am 77 years old Became NRI in April 2016, living in USA but I do visit india twice a year . Should I convert my status to NRI ? I don’t have income in the USA but in India like dividends
    Savings interest . Please reply whether it is essential to change my status at this age. I
    Savithri

    • Aman says:

      Hello Savithri ji,

      In such a case, based on the information I gathered FEMA regulations apply!

      Under FEMA guidelines, any Indian whose residency status changes to NRI needs to inform their bank of this change to an NRI. If you have income in India in any form, I would recommend you change your resident savings account to NRO so that you comply to the law.

      Again, I am not professionally equipped to answer your query as this article is based on my personal experience and the information I curated on this topic. If you need more details tailored to your personal circumstances, please consider speaking to a financial advisor who can guide you through this.

      I hope this information helps.

  8. vesekar says:

    Hi Aman,

    Thanks for your very informative post. Appreciate your gesture to disseminate the knowledge to others.

    As like many others, I am not aware that I could not hold a resident account being a NRI. I would convert my account to NRO immediately. Meanwhile request your guidance on the below queries:

    1. I do have a FD on my resident account, that would mature after an year only. What will happen if I convert my account to NRO now? Will that be closed and moved to my NRO account or would it continue to exist and later moved to NRO account once it matures.

    2. In case if that gets closed now, do I need to make a new FD request on NRO account? What will be the tax rate (TDS) applicable on FDs made on NRO account

    3. Can I move funds from my NRO account to NRE account? What will be the Tax (TDS) applicable on FDs made on NRE account

    Thanks in advance for clarifying

    • Aman says:

      Hi Vesekar,

      I am glad you found this post useful!

      My sincere apologies for the delay in replying to your comment.

      Here’s what I think:

      1. The FDs on your resident account will continue to exist with the same account numbers. When I changed my savings account to NRO, the FDs stayed intact as the account number for your NRO account stays the same as your resident savings account.

      2. I hope this is covered above.

      3. No, you cannot transfer funds from NRO to NRE account. I don’t know about the TDS applicable on NRE account Fixed Deposits – I suggest you check with your bank on this, please.

      I hope this is what you were looking for? Please do let me know if can help you further!

      Thanks
      Aman

  9. munna says:

    NRI are of different types – people on visas or those Indians who have acquired Foreign Nationality but now possess OCI Card. Can an OCI card holder convert resident savings account to NRO account easily or is there any catch behind that? Thanks !!!

    • Aman says:

      Hi Munna,

      My apologies for the late reply.

      Any Indian who is out of India for a period more than 6 months is categorized an NRI. I am not aware of any issues an OCI card holder would face while converting savings account to NRO.

      I hope that helps.

  10. Vidya says:

    Hi. Can we pay existing home loan through an NRE account?. If so are you aware of the procedure?

    I dont need an NRO account because I don’t have any incomes from India after I leave and an NRE account is better suited for my needs.

    Any help would be greatly appreciated. Thanks! 🙂

    • Aman says:

      Hello Vidya,

      Yes, I don’t see any reasons why not… You can simply get in touch with your bank asking how you can transfer money to your loan account.

      If you don’t need the NRO account, you can simply close your savings account and open a new NRE account instead.

      BUT, NRE account is only for NRIs which you won’t be when you just leave India for the first time. Ideally, you should do that WHEN you become an NRI (6 months after staying out of India).

      So, you would need to check with your bank about such a case.

      If you do find out, please do share the information here 😉

      Cheers!

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