Do I need an NRE/NRO account to send money to India as an NRI?

Can NRI hold a savings account in India?

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

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

In this post, I will answer these questions about what’s wrong with holding your Indian resident savings account once your status changes to NRI.

Do NRIs need to convert resident savings account to NRO NRE account

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 an 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 stops 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 eyes of the government of India, that’s not legal.

Let me explain.

The rules, interest rates and legalities that apply to NRI accounts differ from 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, 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 an NRO account and operating a savings account in India with NRI status (staying 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 learned this law, I switched my Indian savings account to an 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, an NRO account is to deposit your INR income in India. If you have any income in India like from passive income sources like rental property, the stock market, dividends or any other investments, you need an NRO account.

Any payments towards insurance premiums, and EMIs for loans you took while in India should also be paid using an NRO account. You can send money from the 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, you will need to inform the respective banks/companies about your new account number because you will have a new NRO 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 banks have online application portals that 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.

Please write in the comments section below if you have any queries or suggestions to add to this topic.

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.

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55 Comments

  1. HI Aman,
    You have provided very useful information and i thank you for this. i understand that sending money from outside India to NRO account is legal and will not be taxed (except interest earned on it), is transferwise a legal system to send money from abroad to India in NRO account ? i believe money transaction happens with in Zones like Euros sent from Europe in Transferwise Euro account in Europe and then same amount is sent to NRO account in India through Transferwise India branch (INR to INR transaction). Request your opinion on this.

    Thank you
    Sachin

    1. Hi Sachin,

      Thanks for your comment – I am glad you found this useful.

      Yes, it is totally legal to send money from abroad to your NRO account. And yes, you’ll not have any additional tax except for on the interest you earn on the amount lying in your NRO account as you’d have already paid tax on this amount in the source country.

      TransferWise (review) is a completely legal and safe way to send money to India to both your NRO/NRE accounts. Your understanding of how TransferWise works is on point. That’s also the main reason how transfers happen quite quickly – you can read how TransferWise works here.

      I hope this helps – let me know if you have any further queries.

      Aman

  2. Hi Aman, we are moving to NL. Can i convert my savings account to NRO now or shall wait for 182 days? I don’t have any address proof or electricity bill as we have not moved yet.

  3. Thank you sir. Finally found a perfect explanation on this topic after searching web for this since many days. Many thanks again and definitely I will share this with my friends, colleagues as well..

  4. Do you have to be in India to open an NRE/NRO account. I live in the US and want to take the least hassle free method to open and operate.
    Previously I used SBI but to even change my phone numnber, I had to fill up forms and take it to India!

    I want to change account profile, get cheque books, and debit cards to my US address as when i visit india, I don’t want to spend 80% of my holiday bouncing from bank to banl

    1. Hi Subramani,

      You don’t need to be in India. Most banks have an online application process where you can download the form and post them with the documents – I changed my savings account to NRO and got them to arrange courier pick up service with the application form and required documents.

      I used the same process to open a new NRE account as well.

  5. Hi Aman,
    Thanks for neat and useful article,
    I have a query, I am working for company in India and on Deputation with Malaysian unit of same group.
    I just landed here and will be here for 1 year, SO surely I am breaching 182 days fence, But I am entitled to quarterly all paid visit to India.
    Now my case is such that I am still on a roll in Indian company and getting salary in India and I will be getting salary in Malaysia as well, The taxation in Malaysia will be taken care by Company,

    So basically what will be my status after 182 days (Might be around in February 2020)
    Do I need to convert my salary account to NRO? And I have 5 other savings accounts in India, Do I need to convert those as well?

    Regards,
    Abhijeet

    1. Hi Abhijeet,

      As per the FEMA guidelines, yes you would need to change the status on all accounts if you have stayed outside India for 182 days in the last Financial Year. If this is a temporary move, I would suggest changing the status on at least your main account but really for you to take a call. You can also consult your CA to help take a decision but looking simply at FEMA guidelines, unfortunately, that’s the ask.

      Cheers!

  6. Hi Aman,

    Thanks for sharing very helpful info and continuing to answer all queries politely for more than an year. Good job!!! Requesting you to take some time to answer my below queries as well.

    I’ve been in US for past couple of years and never learnt about NRE/NRO account completely until I read your article. All my transfers from US are made to India saving account only. If its converted to NRO account, I guess then amount currently available in savings would be changed to NRO and lead to taxable of 30% (correct me if I’m wrong). Is there any way to transfer amount from NRO to NRI or avoid those tax payment .

    Thanks,
    Diwahar

    1. Hello Diwahar, thanks a lot for your comment and please accept my apologies for the late reply.

      Can you please clarify which 30% tax are you referring to? You can easily transfer money from NRE to NRO account but not from your NRO to NRE. Cheers!

  7. Hi Aman,
    In order to open a NRE account bank generally asks for approved work permit or valid visa. In my case my visa is expired and extension request is in process. My bank is refusing to open a NRE account since I do not have a valid visa at this time. What are my options other than waiting for my work permit to be approved. And what if my work permit is denied, how do I transfer my US earnings ? Any help is appreciated.
    Thanks

    1. Hello Anoop,

      My sincere apologies for replying late to your comment – somehow it landed in the spam folder and I recovered it only now.

      I hope your work permit visa has been sorted out?

      Cheers
      Aman