As you immigrate overseas for education, employment, or any related purpose, your status changes from an Indian citizen to a non-resident Indian. Several things change as you gain an NRI status. A different set of rules govern your financial dealings. Have you ever wondered what happens to your Indian Savings Account as you move abroad? Let us understand the need for an NRI to close or convert their Indian Savings Account to an NRI Account.
According to the Reserve Bank of India or RBI, you need not close your Indian Savings Account upon immigrating overseas. You can simply convert it to an NRI Account. NRI Remittance is a significant source of income for India. Hence, to regulate and monitor these money transfers to India, the RBI emphasises opening an NRI Account.
The need to convert
Two main reasons you should convert your regular Indian Savings Account to an NRI Account.
- Avoid violation of FEMA: If you continue to operate through your regular Indian Savings Account as an NRI, you violate the Foreign Exchange Management Act laid by the RBI. To avoid falling into legal trouble with RBI, converting your Savings Account to an NRI Account is necessary.
- Avoid paying unnecessary charges: As you move abroad, you set up a new account to meet your financial requirements. In this case, your regular Indian Savings Account becomes non-operational. The Indian bank may still charge you with account maintenance fees. Hence, we recommend closing your Indian account to avoid unnecessary bank charges.
How to close an Indian Savings Account?
The procedure differs for each bank. Some banks allow you to close your account online, while others may require you to visit the bank in person. First, open NRI Savings Account before closing your Indian account to avoid transfer hassles.
What is the type of accounts to consider?
There are three types of NRI Accounts. These can be opened and managed remotely online.
- NRE Account: Non-Resident External Account allows you to deposit your foreign income securely. Interest gains from an NRE Account are 100% tax-exempted and fully repatriable.
- NRO Account: Non-Resident Ordinary Account is ideal for parking your income from investments and assets in India. Note that the interest gains from an NRO Account are subjected to tax deductions.
- FCNR Account: Foreign Currency Non-Resident Account is where deposits can be held in 9 major currencies globally. Funds here are maintained in an NRI Fixed Deposit. Interest gains through this are tax-free and fully repatriable.
