Once you become an NRI or if your residential status in India changes there are several things you should settle domestically before you start enjoying the new phase of yours. These could be anything from bank accounts to properties. Majority of the people tend to dismiss these issues as inconsequential but suffer the consequences later on. So, today we will discuss what to do with your resident savings bank account if you are relocating to a foreign country.
Ways To Deal With The Savings Account
It is very common among people leaving India to continue using their resident savings accounts. This is a huge mistake and can cost them dearly as well. As a matter of fact, it is not permissible under the law to do the same. Simply speaking, it’s illegal for NRIs to have a resident savings account. The FEMA stipulation mandates that after attaining the status of an NRI, the active savings account needs to be converted into an NRO account.
Every revenue that an NRI generates in India, such as property rentals, investments, pension etc, must be put in this account. In case NRIs make any payment; insurance premiums or EMIs on loans they took while in India; they must use NRO accounts for the same. They have to intimate their banks regarding the status change within a time limit as well, at the most 3 months.
Once you inform the bank about the change in residential status, the latter will change your active saving account to an NRO account and you can continue to transact through the same as well. Otherwise, you can close the current savings account and open a new account if you wish to change your bank.
What Are The Repercussions For Using The Savings Account?
However, if you keep on using the savings account even after becoming an NRI, you can easily walk into serious trouble by attracting a huge penalty. Also, the money from the NRO account can be repatriated, up to $1 million, but you need to get a certificate from a CA for payment of taxes in line with your income in India. When it comes to depositing funds from overseas, NRIs would need an NRE account, which has no limit as far as repatriating funds is concerned.
Coming to the main point, if you don’t turn your savings account into an NRO account then in the advent of any liability even the bank will not be able to assist you. According to FEMA regulations, the penalty for holding the savings account even after becoming an NRI is thrice the amount involved in it or 2 lakh if the amount is not quantifiable.
It is pertinent to mention that it is tough to find an instance where an NRI has been penalized for not changing the status of the bank account. But this is hardly a consolation as the law can catch up with you any time. So, don’t take a risk over such matters.
