Converting Resident Bank Account to NRI Bank Account

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

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.