Convert Resident Account to NRO Account

Published on Friday, October 18, 2019 by Chittorgarh.com Team | Modified on Friday, July 24, 2020

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Convert Resident Account to NRO Account

When a resident Indian gains non-resident Indian status, it is mandatory by the law to change the resident status in the bank accounts. If you continue holding the resident bank account even after your resident status is changed for a long duration, you may have to pay penalties for it.

For converting a resident account to a NRI account, the account holder has to go through various formalities and submit additional documents. This article discusses how to convert resident bank account to NRI accounts.

NRIs can open two types of NRI accounts based on repatriable (NRE) and non-repatriable (NRO) basis. But, NRIs can only convert the savings bank account to NRO account. It is because money transfer from the resident account to an NRE account is not permitted.

To convert the resident account into an NRE account, an investor has to close the account. And, open a new NRE account. If there is money in the resident account, transfer them to another resident account on the name of a family member.

Read our post on NRE vs NRO account in India to know more on NRE & NRO bank accounts.


How to convert the resident account to NRO account?

The step-by-step process of converting a resident account to the NRO account is as followed:

  • Contact the bank where you have your resident bank account and request for 'conversion from a resident to the NRO account'.
  • Fill the application form and get it signed by all the account holders.
  • Collect photocopies of the required supporting documents.
  • Notarize the photocopies from Indian banks with overseas branch/ notary public/Indian consulate.
  • Self-attest the photocopies of the required documents.
  • If any FD is associated with the account, attach the receipts.
  • Send the form along with documents to the bank address.

After receiving the form along with the documents and completing verification by the bank, your resident account will be converted to the NRO account.


Documents required for converting Resident Account to NRI Account

NRIs have to submit the following documents with the application form for converting resident saving bank account to an NRI account:

  • FATCA Declaration Form
  • FEMA declaration form
  • Declaration of P.O. Box (for NRI residing in UAE)
  • Copy of PAN card
  • Resident Bank account closure form
  • NRI Bank application form
  • 2 passport size photographs
  • Foreign residence address
  • Copy of work permit or valid visa
  • Copy of passport

All the documents should be authorized by the competent authority. 


Penalty for not converting to NRO Account

When the resident status of Indians changes to a non-resident (NRI), they have to close the existing resident saving bank account or convert them into NRO accounts. According to FEMA, continuing with the same resident status is illegal for NRIs.

As per section 13 of FEMA, 1999, the person contravening the act will be liable to pay a penalty up to 3 times the amount involved in it or Rs 2 lakh when the sum is not quantifiable. Further, a penalty of Rs 5,000 will be charged every day from the 1st day of intervention until the penalty is paid.

So, it is advised to convert the resident account to NRO account as soon as the Indian gets NRI status.


Post Conversion NRO Account Detail

After converting the resident account to the NRO account, some details remain the same and some changes. Here is the information of post-conversion NRO account details:

  • Update the bank account with existing holdings maintained with a bank in the ledger account.
  • The account number will remain the same.
  • Funds from savings account to NRO account will be transferred automatically.
  • If Indian address is not changed, no need to submit the proof.
  • Updating current overseas address proof is mandatory.
  • Income earned from interest on FDs and savings account will be taxed at a minimum rate of 10% and a maximum of 30%+surcharge.
  • Cheque book remains the same.
  • A new debit card will be issued with NRI account status.
  • Internet login ID and password will be the same.
  • Re-designate FDs from residents to NRO FDs.

When to convert resident account to NRO Account?

As per FEMA guidelines, after gaining NRI status, it is illegal to hold savings accounts in India with NRI's name. Although, the reasonable time duration to change bank account status is not defined in the FEMA regulations. NRIs can consider the period to be maximum of 3 months.

Continuing with the same resident savings account may attract hefty fines and penalties in India. NRIs can only maintain NRO/NRE/FCNR accounts in any designated bank in India.

 

ProStocks Non-PIS NRO Trading

 



Frequently Asked Questions

  1. 1. How to convert the resident account to NRO account?

    It is required to convert your resident bank account to NRO account soon after your resident status changes to NRI as per income tax law in India.

    If you are in India, you could visit the bank branch and fill the forms and submit supporting documents for this conversion.

    If you are residing abroad, you can send the application form along with the documents. The copies of all the documents should be self-attested and notarized by the competent authority.

     

  2. 2. Can I convert my savings account to the NRE bank account?

    No, you cannot convert your savings account to NRE bank account. However, you can convert it into an NRO account. It is because transferring funds from the resident account to an NRE account is not permitted as per RBI guidelines. 

    An NRI needs to close the existing resident account. And, open a new NRE account. If there is money in the resident account, they need to withdraw those funds.

     

  3. 3. What is the penalty for not converting resident account to NRO ac?

    As per FEMA rules, the penalty for not converting resident account to an NRO account is up to 3 times the amount involved in it or Rs 2 lakh when the sum is not quantifiable. A daily penalty of Rs 5,000 will also be charged from the 1st day of intervention until the penalty is paid.

     

  4. 4. Are securities transferred from resident to NRO account repatriable?

    No, securities in the resident account cannot be transferred with the purpose of repatriable benefits. After changing the resident status, NRIs can transfer those securities to the NRO demat account. NRIs can keep only non-repatriable securities in the NRO demat account which is linked to NRO bank account.

     

  5. 5. How to invest in the India equity market as NRI using the money in the resident Indian bank account?

    As a first step towards investing in the India equity market, an NRI has to convert his Indian savings bank account into the NRO Bank Account. An NRO account is for NRIs to manage the income earned in India i.e. rent, dividend, pension, sale of property purchased before becoming an NRI, etc. Any person resident outside India can open an NRO account. Income earned in foreign as well as in India can be deposited in this account.

    Options:

    1. NRO Non-PIS Account
      • Convert the existing resident bank account to NRO bank account or open a new NRO bank account, NRO Demat Account, and NRO Trading Account.
      • Deposit your money from resident Indian account to NRO bank Account in case a new account is opened.
      • Start investing money in India Stock Market
    2. Use Family Members Account
      • Open a resident Indian account in the name of one of your family members who live in India.
      • Gift/lend the money to him.
      • Invest using this account if your family member is ok with this
      • Note that they have to pay income tax in India on the net profits in this account.
    3. Invest in Mutual Funds and IPO

      You could use your Non-PIS NRO Account to invest in Mutual Funds/IPO in India. Please note that AMCs are allowed to accept investments only in Indian currency. For investing in IPO, an NRI should check the Red Herring prospectus of issuer company that provides the detail of NRI eligibility to invest in IPO.

     

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