Nri - nro account
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
19 January 2014
Before leaving India and become NRI, one need to convert their saving bank account into NRO. The onus to change is on individual and not on bank.
Question is if the same is not converted by individual or converted later may be after becoming NRI say 10 years, then is there any panel provision under FEMA for individual or RBI Notification?
Question is if the same is not converted by individual or converted later may be after becoming NRI say 10 years, then is there any panel provision under FEMA for individual or RBI Notification?
20 January 2014
Hi
No such penalty but you wont be able to remit money in SB a/c & amt remitted will be taxable.
Thanks
No such penalty but you wont be able to remit money in SB a/c & amt remitted will be taxable.
Thanks
Querist : Anonymous
Querist :
Anonymous
(Querist)
20 January 2014
Thank you for reply.
But if such NRI has opened NRE Account and remit the amount through this account. Then is it taxable? (assuming having no NRO A/c,continue with the saving bank account)
But if such NRI has opened NRE Account and remit the amount through this account. Then is it taxable? (assuming having no NRO A/c,continue with the saving bank account)
Querist : Anonymous
Querist :
Anonymous
(Querist)
22 January 2014
As per your first reply, "amount remitted will be taxable" . But as the remittance is not permissible through saving bank account (as you mentioned in your first reply)
then through which it is remitted and how it is taxable??
then through which it is remitted and how it is taxable??
Querist : Anonymous
Querist :
Anonymous
(Querist)
22 January 2014
As per your first reply, "amount remitted will be taxable" . But as the remittance is not permissible through saving bank account (as you mentioned in your first reply)
then through which it is remitted and how it is taxable??
then through which it is remitted and how it is taxable??
03 August 2024
Under FEMA (Foreign Exchange Management Act) and related regulations, the handling of accounts for NRIs (Non-Resident Indians) involves specific rules and guidelines. Here’s a detailed explanation addressing your concerns about the conversion of accounts and the taxation implications:
### **1. **Conversion of Savings Bank Account to NRO Account**
#### **A. Requirement for Conversion**
- **Regulation:** When an individual becomes an NRI, they are required to convert their existing savings bank account into an NRO (Non-Resident Ordinary) account or close it and open an NRO account.
- **Onus:** The onus of converting the account is on the individual. If an NRI does not convert their account or does so later, there can be implications.
#### **B. FEMA Provisions and RBI Notifications**
- **FEMA Regulations:** FEMA regulations require that once an individual’s residential status changes to NRI, they must ensure that their bank accounts comply with the rules applicable to NRIs.
- **RBI Notifications:** RBI guidelines state that if a person’s status changes to NRI, they should inform the bank and convert their account accordingly.
**Key RBI Notification:**
- **RBI Circulars and FEMA Notifications:** Specific RBI circulars and FEMA notifications detail the rules regarding account conversions and NRI compliance. For example, RBI’s Master Circular on “Remittances to India” and “Deposits by Non-Residents” cover these aspects.
### **2. **Impact of Not Converting Account**
#### **A. Legal Implications**
- **Violation:** If an NRI does not convert their savings account into an NRO account or continues to use a savings account after becoming an NRI, it can be considered a violation of FEMA regulations.
- **Penalties:** The penalties for non-compliance can include fines or penalties as per FEMA provisions, but such cases are typically addressed on a case-by-case basis.
#### **B. Tax Implications**
- **Remittance through Unconverted Account:** If funds are remitted from a savings account that should have been converted to an NRO account, it may be deemed a violation. The taxability of these funds depends on their source and nature.
- **Taxability:** If the amount is earned abroad and remitted to India via a savings account that should have been converted to an NRO account, the remittance itself is not directly taxable. However, the source of funds and the method of remittance could have implications for tax and compliance.
### **3. **Use of NRE Account for Remittance**
#### **A. NRE Account Details**
- **Purpose:** NRE (Non-Resident External) accounts are used to hold and manage foreign earnings. They allow for repatriation of funds and offer certain tax benefits.
- **Remittance:** Funds from an NRE account can be freely remitted outside India without any restriction or tax implication on the principal amount.
#### **B. Taxation**
- **Interest Income:** Interest earned on NRE accounts is tax-free in India under Section 10(4)(ii) of the Income Tax Act, provided the account holder qualifies as a Non-Resident or Resident but Not Ordinarily Resident (RNOR).
- **Funds Repatriation:** Remittances from an NRE account are not taxable in India. The source of these funds (foreign income) is also generally not taxable in India.
### **4. **Procedural Guidelines**
#### **A. Conversion and Compliance**
1. **Account Conversion:** NRI should convert their savings account to an NRO account or close it and open an NRO account as soon as their residential status changes.
2. **Notify Bank:** Inform the bank about the change in status and complete the conversion process.
#### **B. Remittance and Taxation**
1. **Using NRE Accounts:** For funds earned abroad and remitted to India, use an NRE account to avoid complications. Ensure that the account is properly maintained to avoid any legal or tax issues.
2. **Record Keeping:** Maintain proper records of all remittances and sources of funds for tax purposes and compliance.
### **Summary**
1. **Conversion Requirement:** It’s mandatory to convert your savings account to an NRO account upon becoming an NRI or open a new NRO account.
2. **Legal Consequences:** Non-conversion may lead to non-compliance issues under FEMA regulations.
3. **NRE Account:** Funds in NRE accounts are repatriable and tax-free in India, with no tax on remittances from such accounts.
4. **Taxation on Funds:** If funds are remitted from an unconverted savings account, ensure compliance with FEMA regulations and be aware of potential tax implications based on the source and nature of the funds.
If you need more specific advice tailored to individual circumstances or further clarification, consulting with a tax advisor or legal expert specializing in NRI taxation and compliance would be beneficial.
### **1. **Conversion of Savings Bank Account to NRO Account**
#### **A. Requirement for Conversion**
- **Regulation:** When an individual becomes an NRI, they are required to convert their existing savings bank account into an NRO (Non-Resident Ordinary) account or close it and open an NRO account.
- **Onus:** The onus of converting the account is on the individual. If an NRI does not convert their account or does so later, there can be implications.
#### **B. FEMA Provisions and RBI Notifications**
- **FEMA Regulations:** FEMA regulations require that once an individual’s residential status changes to NRI, they must ensure that their bank accounts comply with the rules applicable to NRIs.
- **RBI Notifications:** RBI guidelines state that if a person’s status changes to NRI, they should inform the bank and convert their account accordingly.
**Key RBI Notification:**
- **RBI Circulars and FEMA Notifications:** Specific RBI circulars and FEMA notifications detail the rules regarding account conversions and NRI compliance. For example, RBI’s Master Circular on “Remittances to India” and “Deposits by Non-Residents” cover these aspects.
### **2. **Impact of Not Converting Account**
#### **A. Legal Implications**
- **Violation:** If an NRI does not convert their savings account into an NRO account or continues to use a savings account after becoming an NRI, it can be considered a violation of FEMA regulations.
- **Penalties:** The penalties for non-compliance can include fines or penalties as per FEMA provisions, but such cases are typically addressed on a case-by-case basis.
#### **B. Tax Implications**
- **Remittance through Unconverted Account:** If funds are remitted from a savings account that should have been converted to an NRO account, it may be deemed a violation. The taxability of these funds depends on their source and nature.
- **Taxability:** If the amount is earned abroad and remitted to India via a savings account that should have been converted to an NRO account, the remittance itself is not directly taxable. However, the source of funds and the method of remittance could have implications for tax and compliance.
### **3. **Use of NRE Account for Remittance**
#### **A. NRE Account Details**
- **Purpose:** NRE (Non-Resident External) accounts are used to hold and manage foreign earnings. They allow for repatriation of funds and offer certain tax benefits.
- **Remittance:** Funds from an NRE account can be freely remitted outside India without any restriction or tax implication on the principal amount.
#### **B. Taxation**
- **Interest Income:** Interest earned on NRE accounts is tax-free in India under Section 10(4)(ii) of the Income Tax Act, provided the account holder qualifies as a Non-Resident or Resident but Not Ordinarily Resident (RNOR).
- **Funds Repatriation:** Remittances from an NRE account are not taxable in India. The source of these funds (foreign income) is also generally not taxable in India.
### **4. **Procedural Guidelines**
#### **A. Conversion and Compliance**
1. **Account Conversion:** NRI should convert their savings account to an NRO account or close it and open an NRO account as soon as their residential status changes.
2. **Notify Bank:** Inform the bank about the change in status and complete the conversion process.
#### **B. Remittance and Taxation**
1. **Using NRE Accounts:** For funds earned abroad and remitted to India, use an NRE account to avoid complications. Ensure that the account is properly maintained to avoid any legal or tax issues.
2. **Record Keeping:** Maintain proper records of all remittances and sources of funds for tax purposes and compliance.
### **Summary**
1. **Conversion Requirement:** It’s mandatory to convert your savings account to an NRO account upon becoming an NRI or open a new NRO account.
2. **Legal Consequences:** Non-conversion may lead to non-compliance issues under FEMA regulations.
3. **NRE Account:** Funds in NRE accounts are repatriable and tax-free in India, with no tax on remittances from such accounts.
4. **Taxation on Funds:** If funds are remitted from an unconverted savings account, ensure compliance with FEMA regulations and be aware of potential tax implications based on the source and nature of the funds.
If you need more specific advice tailored to individual circumstances or further clarification, consulting with a tax advisor or legal expert specializing in NRI taxation and compliance would be beneficial.
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