If you are moving abroad soon and aiming to attain non-resident Indian status, you should know that you cannot continue with your existing Resident Savings Account. But what should you do with the funds saved in it? Can you convert it into a Non-Resident External Account? Or does it need to be a Non-Resident Ordinary Account?

The Reserve Bank of India has allowed NRIs to operate three accounts in India: NRE, FCNR, and NRO Account. You can select whichever is suitable depending on your financial and banking needs. Let us discuss these:

NRE Account

The NRE Account allows you to transfer your foreign earnings to India. It is a rupee-denominated account where the interest earned is tax-free. You can open and operate it as a Savings or Current Account, Fixed or Recurring Deposit Account. The interest and principal amounts are fully and freely repatriable to India.

FCNR Account

A Foreign Currency Non-Resident Account is a Term Deposit allowing you to earn tax-free interest on your investments. You can open it in various currencies, including US Dollar, Canadian Dollar, Sterling Pound, Japanese Yen, Hong Kong Dollar, Singapore Dollar, Australian Dollar, Euro, and Swiss Franc.

NRO Account

You can open an NRO online for depositing earnings accruing or arising in India, such as rental income, dividends, pensions, etc. It is a rupee-denominated account operated as Current, Fixed, Savings, and Recurring Deposit Accounts. You cannot repatriate more than USD 1 million in a financial year from this account, including taxes.

Is the conversion of the Resident Savings Account possible?

Suppose your residential status has now changed to an NRI. In that case, it is compulsory for you to either close your Resident Savings Account or redesignate it into an NRI Account immediately. Remember, you cannot convert it into an NRE Account because this helps you save overseas income only. Your Resident Savings Account, on the other hand, will hold deposits generated in India and would attract taxes too.

Therefore, you cannot convert it into an NRE Account. The amount deposited, which you earn outside India, is entirely tax-free, and both interest and principal amounts are freely repatriable to your resident country.

Why open NRO Account?

The best option for newly-turned NRIs is to convert the Resident Savings Account into an NRO Bank Account and transfer the deposits there. Since this account parks all your income from India, it can hold all your existing resident savings deposits. The interest earned is liable to a tax deduction at source at 30% plus surcharge and cessation. You can repatriate only up to USD 1 million in a financial year.

There is no option if you plan to keep your local savings in your Resident Savings Account. Open this account remotely from your home using the Banking app.