Becoming an NRI? Key Bank Account Changes You Must Make
Read ahead to learn about the changes you can expect and the right preparation to comply with the RBI regulations.
New Delhi: You may be moving overseas for work or higher education. With the new country comes new experiences and challenges. As you complete more than 182 days of your visit, you attain the status of a Non-Resident Indian (NRI). This changes everything in terms of how you manage your income in India. Your bank accounts go through a modification. Read ahead to learn about the changes you can expect and the right preparation to comply with the RBI regulations.
Conversion of your resident bank accounts
Once you qualify as an NRI, your existing resident savings accounts should no longer be active. As per the Foreign Exchange Management Act (FEMA) regulations, you are required to either close the accounts or convert them to Non-Resident Ordinary (NRO) Savings Account that reflect your NRI status. For this, you will need to prove your updated status through overseas address proof, residence permit/ valid VISA, Passport, and other eligible KYC documents. You cannot manage money in India until you re-designate your bank accounts.
The types of NRI accounts you can open
After becoming an NRI, you can open three major types of NRI accounts that serve different purposes.
- NRO account
An NRO (Non-Resident Ordinary) account helps you manage your Indian income, such as rent, dividends, interest earnings, pension, etc. The funds in this account are maintained in Indian rupees and the interest earned on them is taxable in India. You can repatriate a portion of funds, i.e., up to USD 1 million in a financial year, to your overseas account.
- NRE account
As you work and make investments abroad, you may want an account to maintain your foreign income. This is where an NRE account helps. It converts the deposits you make in foreign currency into Indian rupees for easy management. You can freely repatriate the principal and interest earnings whenever you want. Also, the interest earnings are free from taxation.
- FCNR account
Unlike NRO and NRE bank accounts, FCNR (Foreign Currency Non-Resident) is a fixed deposit account. It lets you park foreign income in the original currency. Most banks, like IDFC FIRST Bank, accept major currencies like USD, British Pounds, Euro, etc. As there is no conversion, you are protected from exchange rate fluctuations, and the funds are tax-free and freely repatriable.
Linking other financial solutions with your NRI accounts
Once you set up your NRI accounts, you can proceed to link them with eligible financial services like:
- Indian Stock market: The Indian market is growing leaps and bounds, and overseas investments is a big part of it. Non-Resident Indians (NRIs) who want to invest in Indian stocks and bonds can do so through the Reserve Bank of India’s (RBI’s) Portfolio Investment Scheme (PIS). IDFC FIRST Bank ensures quick paperless onboarding for these PIS accounts.
- Loans: You can apply for loan options like an NRI home loan with differential rules for application and repayment with your newly attained status.
- Fixed Deposit: You can open an NRI fixed deposit to earn risk-free and assured interest on your Indian or foreign income by linking your NRI account.
- Real estate: You can also invest in properties with your savings in NRI accounts. RBI lays out differential rules for property purchase and taxation. Refer to them for proper compliance.
Final words
Taking the crucial steps as discussed above helps you stay financially secure in a foreign country. It ensures you are legally compliant. Converting your resident accounts to NRI bank accounts is a fairly simple process. You go about it the same way as regular accounts, except the KYC requirements change. Make sure you provide accurate and updated documents to fast-track the process. You also get the needed assistance for differential rules from the bank representatives.
