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Converting Resident Bank Account to NRI Bank Account

Published on Friday, October 18, 2019 by Chittorgarh.com Team | Modified on Sunday, August 9, 2020

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When a resident Indian gains non-resident Indian status, it is mandatory by law to change the resident status in the bank accounts. If you hold 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 resident account to 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.

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


How to Convert Resident Account to NRO Account

Here is the process of converting a resident account to the NRO account:

  • Download the application form for conversion from a resident to the NRO account.
  • Fill the application form and mention the resident account number.
  • The application form must be signed by all the account holders.
  • Collect photocopies of the documents to convert a resident account to an NRO account.
  • 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, the resident account will be converted to the NRO account.


Documents Required to Convert to NRI Bank Account

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

  • Account Modification Form (To update the overseas address and bank details in the CDSL)
  • 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 NRI, they have to close the existing resident 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.
  • Redesignate FDs from residents to NRO FDs.

When to Convert 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, a reasonable time duration to change bank account status is not defined in the FEMA regulations. NRIs can consider the period 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. Can NRI purchase shares India?

    An NRI can purchase shares in India by investing in stock markets. An NRI cannot do intraday trading and has to take the delivery of the stock purchased.

    An NRI requires an NRI bank account to fund the purchase amount of the stock, an NRI trading account to place the purchase order with the broker, and an NRI Demat account to take the delivery and hold the stock purchased. 

    An NRI is required to open an NRE or NRO accounts depending on the repatriation benefits. If an NRI wants to purchase the stock on a repatriation basis, an NRI requires a PIS approval from RBI and is required to open an NRE PIS bank account, NRE Demat account, and NRE trading account. To buy the stocks on a non-repatriation basis, the PIS approval is optional based on the kind of services offered by the broker and an NRI can buy the stock using NRO (PIS/Non-PIS) bank account, NRO Demat account, and NRO trading account.

     

  2. 2. What should I do with my existing shares, once I become an NRI?

    Once you become an NRI, you have the following options for the treatment of existing shares:

    • Hold existing shares in resident Demat account

      In case you have no intention to make any fresh investment, you can hold the existing shares bought as a resident Indian in the resident Demat account. However, this is advisable for a temporary period or if you are on a temporary assignment. However, from a long term perspective, it is better to go with option 2 or 3.

    • Transfer the shares in the new Demat account

      When you become an NRI, you cannot continue with your holdings in the existing Demat account especially if you are intending to make fresh investments. You have to open a new Demat account with NRI status and transfer the existing shares into the newly opened NRO account.

    • Sell off the shares or gift the shares before becoming an NRI

      In case you have no intention to make new investments as an NRI, it is better to sell off the existing shares or gift the shares to your relative before becoming an NRI to avoid any complexities at a later date.

     

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