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,
    Thanks for your insightful post. This clarifies a lot of doubts. I have a couple of questions
    1- When I open a new NRE/NRO account and close the existing saving account in India, I can only move my money to NRO account, not the NEW account. Is that correct?
    2- If the answer to #1 is yes, will I be taxed on the amount that I am transferring to my NRO account from my old savings account?
    3 – We normally have multiple savings account in India, Do you suggest to keep multiple NRO accounts or is it better to keep just one?

    Thanks
    Sameer

    1. Hi Sameer,

      My apologies for the late reply.

      1- You don’t need to close your savings account – you can convert it to NRO.
      2- I hope #1 addresses this.
      3- You can have as many you want just that you’ll need to manage them 🙂

      Cheers!

  2. Hi Aman,
    I’m working in US since 2+ years and have NRE & NRO accounts in my name so in short, abiding whatever you mentioned in your article.

    My wife is dependent and living with me here. She is not working and have no overseas income. I’m not doing foreign transfers to her India account. She has Savings Bank Accoutn in India and gets deposits through rental property in India and paying taxes every year regularly. My question, does she too need to convert her Savings Account to NRO account?

    Please help with your response. Thanks!

    1. Hi Srinivas,

      Yes, she would need to. The NRI status is driven by the time spent outside of India in the last financial year.

      Thanks

  3. Thanks a ton for this post, even we didn’t know we have to change the status in the accounts. Will start doing it right away!

  4. Quick question what about the PPF accounts? What happens if our status change to NRI. Are we allowed to still invest in PPF?

  5. Hi Aman

    This post is very informative. But there is a small query. We recently moved to UAE in march 2018, but we have still not been coming under NRI status as it is less than 6 Months. Can we send money to India to our normal savings account. We would like to make a lumpsum payment. Wanted to know what would be the implications on such a transfer

    Thanks and Regards

    Vikram

    1. Hello Vikram,

      You can send money to India using your savings account without any issues (amount doesn’t matter really).

      Once it’s past 6 months (when your status changes to NRI), still there is nothing technically stopping you from sending money as such. Legally, you are required to change your account status, which is a straight-forward process.

      Do check out the deals section to grab the best deals on your money transfers.

  6. Hello Aman,

    Thank you for the post. It was really very informative. I have few questions:

    1. As an NRI, can I have both NRE and NRO account in the same bank?
    [Aman] – Yes

    2. I usually travel to India 2-3 times in a year, what is your recommendations to cover the expenditure while I am in India during my visit? After reading your article, my idea is that I will transfer my money from USA to India via NRE account. Then from I transfer the money from NRE account to NRO account (if possible from Q.1), use ATM or debit card of this NRO account for regular expenditures during my stay in India.
    [Aman] – Yes just to add to that, you can transfer money to India from US to your NRE as well as directly to NRO account if you are going to withdraw it for expenditure in India.

    3. If I accept a foreign citizenship and renounce my Indian citizenship, would I be still able to keep my NRE and NRO accounts in Indian bank?
    [Aman] – Yes

    Thank You in Advance.

    1. Hello Alok,

      Thanks for your comment. Please see my reply in-line with your comments 🙂

      I hope you find it useful.

      Thanks
      Aman

  7. Hi Aman ,Thanks a lot for this post mate !! .
    I have couple of doubts . I came to UK in Spt 2016 and havent converted my Indian accounts to NRO/NRE . I havent sent any money to my Indian account from UK .
    I am planning to close my account in India and separately open an NRO /NRE accounts afresh to keep it clean . My question is
    1) Do I need to close all my savings bank accounts in India ?? Coz I dont have track of previous accounts which were opened at different times by diferent employers .?? Or closing the latest one in use is enough ?
    Please suggest me a cleaner way of doing this .
    Thanks !!

    1. Hi Pradeep,

      First of all, my apologies for the late reply!

      If you didn’t convert your resident account to NRO/NRE and want to get things straight now, you don’t need to separately close the resident accounts and open new NRO. You can simply request your bank to convert the Resident account to NRO (the one you use most and want to keep).

      For NRE, you would have to open as a new application.

      Ideally, yes you cannot hold any savings resident account in India so I can only recommend at least close/convert the ones that you know of.

  8. Thanks Aman, that was very informative post.

    I have a one query pertaining to Multiple accounts. I have become NRI recently and I wish to change my Indian bank account soon. But I do have two three accounts opened eventhough I operate only one in most cases.
    My question do I need to change all the bank accounts I hold or can I change the widely used one and keep the rest as it is?
    Would appreciate your response.
    Thanks.

    1. Hi Mohammed – sorry for missing your comments earlier.

      As per my understanding of the law, it has to be all accounts. But you can consult with your CA or someone with legal standing to guide you for your specific case.

  9. Hi Aman,
    These are nice pieces of information shared by you in crisp language. I have one query, I have been out of india more than six months and intend to convert my Resident account to NRO. I got salary in india till july, 2017 and post that I am employed in Canada.
    1. Do we have to pay tax in india on income earned in india and in canada on income earned in canada
    OR
    I can show my indian income in canada and pay tax here. Tax on indian salary is already deducted (TDS). Being my first year here I am a bit confused. TIA

    1. Hi Pankaj, I am not an expert on tax. But my understanding is if you have already paid tax on your income in India, you don’t need to pay it again in Canada.

      I hope this helps.

  10. Hi Aman,

    I’m a indian student travelling abroad for further studies to the US. When do you recommend I convert my account to NRO. Do I have to wait for the six month period for converting or can I convert it before moving to the US. One of the supporting documents seems to be proof of residence in the overseas country. What would be an acceptable proof in this case?

    1. Hi Anand,

      You can convert it as you cross 182 days of stay outside India. As proof of residence, banks usually accept utility bill or bank statement where your address is shown. But, I recommend you contact your bank to get the list of documents they accept.

      Hope this helps.