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How Change in Residential Status Affects Different Accounts & investments

By Hemant Beniwal

Why Financial Planning?

Planning is bringing the future into the present so that you can do something about it NOW.

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Check Financial Plan For NRIs
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Someone rightly said “Change is the only constant in life” but few changes are really tough like the change in residential status for NRIs.

Are you an NRI who is planning to return to India? Or are you a resident Indian who will become an NRI?

Either way, there are certain steps to be taken regarding financial matters. You need to take care of your demat account, Bank account, MFs etc. to ensure that the type of account that you operate matches your residency status.

Must Read – Investment Options for NRI in India

NRI Change in Residential Status

Read – NRI new Tax Rules

Change in Residential Status

Let us look at different accounts and the action to be taken when residency status changes –

Bank Accounts

Resident Indian to NRI

NRIs cannot hold normal savings accounts in India. NRIs can open an NRE or NRO account to deposit his earnings.

An NRE account can be opened as a savings account or a term deposit account. A resident Indian can be made a joint account holder. Funds from NRE account can be transferred to NRO account. Only foreign income can be deposited in NRE accounts. Interest earned in this account is tax-free.

An NRO account can be opened as a savings account or a term deposit account. A resident Indian can be a joint account holder. Only income from India can be deposited in this account. Interest earned in this account is taxable.

NRIs have to convert their resident fixed deposits to NRO deposits.

NRIs can open FCNR accounts to have term deposits. Deposits can be made only in foreign currency. Interest and principal amounts are tax-free. Resident Indians cannot be joint holders to this account.

Process – Visit the bank branch and fill the relevant forms and submit along with identity proof related documentation, passport and visa.

NRI to Resident Indian

NRIs have to convert the NRE and NRO savings accounts to resident savings accounts. NRIs have the option to convert savings accounts to RFC accounts till the time the residency status is RNOR (Resident but not Ordinarily Resident) status.

Fixed deposits in FCNR and NRE accounts can be as-is until maturity date. They can be changed to Resident Foreign Currency (RFC) accounts after maturity.

Process – The NRI has to give a declaration to redesignate NRE/NRO account to Resident Savings account or RFC account Details like customer id, account number etc.  should be filled up, signed and submitted at the local branch of the bank.

NRIs can operate resident bank a/c on ‘either or survivor’ basis. wiseNRI

Must Check this List – NRI Checklist

Demat Account

Resident Indian to NRI

NRIs have to close the demat account that they held when they were resident Indians. They have to open a new demat account or  Portfolio Investment Scheme (PINS) account with a bank. They can buy and sell shares using this account. Sales proceeds can be repatriated to the NRE savings account.

An NRI can have only one PINS account.

Process – The authorised dealer and the depository participants must be informed of the status change.

ReadMyths and Facts about NRI Status

NRI to Resident Indian

NRIs cannot continue with NRI demat account when they become resident Indians. They have to open a resident demat account and transfer all existing investments to it.

While you were a resident Indian, will have to be closed and you would need to transfer the shares to an NRO demat account. You can continue to hold these shares in the NRO demat account or sell them. If you sell them, the proceeds are credited to the NRO savings account.

If you want to buy shares from the secondary market as an NRI, you would need to open a Portfolio Investment Scheme (PINS) Account with a bank. In this scheme, you can buy shares with funds in your NRE account and sale proceeds can be credited to NRE account for repatriation.

Process – The authorised dealer and the depository participants must be informed of the status change.

Mutual Funds

Resident Indian to NRI

The mutual funds can be held when resident status changes.

Process – The NRI should write a letter to individual AMCs along with proof of NRI bank accounts, KYC documents, passport, overseas address proof.

NRI to Resident Indian

The mutual fund units can be held when resident status changes.

Process – Write a letter to individual AMCs with folio no stating your change of Status from NRI to Resident individual and attach the cancelled cheques of your old NRE/NRO accounts and the new resident account.

Read – NRI Capital Gains Tax On Mutual Funds 

PPF Account

Resident Indian to NRI

An NRI cannot open a PPF account. But if he had opened a PPF account when he was a resident Indian, he can hold that account till its maturity.

Process – He can invest amount in it as an NRI using funds in NRE or NRO account.

If he wants to close it, he can use the withdrawal form to do so along with attestation from the bank where the NRE/NRO account is present.

NRI to Resident Indian

Process – The NRI will have to invest money from a Resident savings account.

If he wants to close the account, he will have to fill the withdrawal form along with relevant forms.

Change in Residential Status

NPS Account

Note: NPS detail is purely based on information received from an NRI – if you have some different views please share in the comment section.

Resident Indian to NRI

A Resident Indian will have to close the NPS account when his residency status changes. As an NRI, he can open another NPS account. He can have only one NPS account.

Process – There are two ways –

He can open the account through eNPS if he as an Aadhaar or PAN card. It can be done from the eNPS website.

He can download the NRI NPS form, complete it and submit it to the bank branch.

The amount will have to be remitted through the NRE/NRO account.

Check – NRI Aadhar Card

NRI to Resident Indian

NRIs have to close the NPS account that they opened as NRIs. They can open a new NPS account when they become resident Indians. The NPS account cannot be transferred when citizenship changes.

Process – There are two ways –

He can open the account through eNPS if he as an Aadhaar or PAN card. It can be done from the eNPS website.

He can download the NRI NPS form, complete it and submit it to the bank branch.

The amount will have to be remitted through the resident savings bank account.

ReadNRI Moving Back to India

Insurance

Resident Indian to NRI

A policy taken as a Resident Indian will be valid when you become an NRI. You will have to understand the claim rules and procedure for the status change. You have to inform the company about the change in residency status.

NRI to Resident Indian

NRIs can continue with their life insurance policies that have been purchased abroad. They can also continue with the policies they purchased in India as NRIs. They have to inform the company about the change in residency status.

Hope this gives you some idea about the actions that you have to take when your residential status change. If you find any discrepancy or change happened after we published – please add a comment.

If you have any question related to residential status feel free to ask.

NRI Change in Residential Status
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Hemant Beniwal


Hemant Beniwal is a CERTIFIED FINANCIAL PLANNER and his Company Ark Primary Advisors Pvt Ltd is registered as an Investment Adviser with SEBI. Hemant is also a member of the Financial Planning Association, U.S.A and registered as a life planner with Kinder Institute of Life Planning, U.S.A. He started his Financial Planning Practice in 2009 & is among the first generation of financial planners in India. He also authored Bestseller book "Financial Life Planning". 

    • Hi Surya,

      Yes, it will be taxable but if you can maintain RNOR Status – you can avoid tax. I will soon write a post on this.
      Surprisingly few banks even don’t allow you to continue NRE FDs after the status change – a technical issue on their side.

  • One is allowed to repatriet the income earned from a NRO account. What about the initial amount at the time of conversion that was in the resident account? Can that also be repatriated? Thanks

  • What if I have more than 1 savings account in India and I have opened a separate NRE/NRO account also then I have to convert my existing savings account into NRE/NRO?

    • Hi Tarun,

      An Indian Citizen who have gone abroad for gainful employment or for carrying on a business or vocation or for any other purpose in circumstances indicating an intention to stay outside india for uncertain duration, can open a NRE account

  • I moved to NRI status and I have rental income in Kerala. Can I deposit it to my joint account with my mother or to my NRO account only?

  • I am currently an nri since 3 years but till now using normal saving account. I have recently invested in MF (75000 INR) and Stock (150000 INR) back from 2 months. What should I do now Can I carry on with normal saving account?

  • Hi Nagesh,

    An NRI cannot invest in PPF, however, if one’s residential status subsequently changed to NRI, the account was allowed to be run till maturity

  • Hello!
    I have started investing in mutual fund through SIP from Resident Saving Account about few months ago. I am NRI from last 6 years. I have not open NRE or NRO Account because of I haven’t got legal status yet. What should I do? Should keep doing my investment now once I gor legal status Can I change my Account to NRE/NRO and also able to change my KYC through PAYTM Money as NRI. Please let me know I have to find information but i haven’t got anything yet.

    Thanks.

  • My parents made joint savings bank accounts with me while i was a resident and a minor. Now am an NRI. Does this account have to be closed ? I heard an NRI can continue to have a resident bank accont with close relatives, on “either or survivor” basis, but would like some confirmation, thank you.

  • Hi Martes,
    Firstly, you have to inform the bank about your NRI status, and as per my opinion, you can continue the account on “either or survivor” basis. For better confirmation, consult with your bank.

  • I have opened trading and Demat account with upstox and buy some shares and once I received the statement it is showing wrong status resident instead non-resident I want to know how I can request to correct my status?

    • your KYC might be as Resident Indian that is why it might be showing so, you can still contact their customer service regarding it.

      • Thanks Rohit. Is there any official document ( from RBI) to support this so that I can produce the same to my local bank. Thanks once again. Sorry for the late reply🌹🌺🙏🏻

  • I’m already an investor in mutual funds. I want to change my resident account to NRE / NRO account. What will happen to my existing investments and SIPs?

    • hi, Your savings account will get changed to the NRO account. You will have to inform your mutual fund company regarding your change of status, and then you will have to update your KYC as NRI, It won’t affect the funds.

  • I am staying in Israel for work for the last 3 yrs. If I fill the documents, what should I write in my country of residence?

  • Sir the lack of proper guidance in even simple issues is mind numbing. I was unaware I needed to inform of change of status to bank (NRI to RESIDENT) it has been 3 years since I returned to India, can I inform now after 3 years to change my NRE account to normal resident account..I hope there will be no imprisionment or huge penalty. I want to fix this issue as a law abiding citizens.

    • Hi Varun,
      There is can be some penalty it can be in some sort of monetary terms or they might cease the account, but you won’t have to face imprisonment.

  • I was an NRI. Came to India in Dec 2020 expecting to go back on another job opportunity. Now I am not planning to go back. How can I change the status from NRI?

  • Mr. Hemant Beniwal
    Thanks for writing the articles to increase the knowledgeable of NRI’s. Your articles are very informative.

  • I am currently an NRI and would be returning to India in couple of years time. I plan to invest in ETFs here. My question is, once I return to India, can I continue to own these ETFs or I should sell them? Are there restrictions on holding foriegn assets (in this I am referring to only financial assets like ETFs or Bonds) when I return? Do i have to pay tax two times (once in the foriegn country and again in India), when I redeem the investments?

    • Hi Sunil,

      As per my knowledge, you can hold foreign assets while you return to India. However, it is preferable to open an RFC account for the same while you return to India. For taxation purpose, you have to check DTAA Between the countries.

  • I registered few companies in India and my residency status has changed from Indian Resident to NRI what do I need to do and how will it effect me?

  • After working 23 years in the Gulf, i have returned. If I change my NRE account to resident, my NRE FD is taxable even though i am not coming under taxable limit?

    • Hi Sankar,

      As per my Knowledge Yes it is taxable after returning to India, Deduction under Section 80TTB up to ₹50,000 may be claimed on the interest income from FDs only if an individual qualifies as a resident senior citizen (60 years or more) in India.

  • I was NRI in UAE for past 7 yrs and returned to India on 1 Aug 2020. Thus only 4 months out of India. If I can go to UK for 2 months on visit visa, can I retain NRI status for this F/Y?

    • As per my knowledge, Your status will be considered as NRI for this year considering if your total Indian taxable income is less than 15 Lakhs.

  • I am already a NRI for several years now and planning to invest in MF and equity shares from my NRE account. But my KYC status is Resident Kindly guide me on how I can change my KYC status from Resident to NRI status?
    Also my NRE account in India is not PIS activated Please guide me on how to get my PIS activated for my NRE account.
    Thanking you in anticipation…

  • I came across your this wiseNRI first time I found so much of information so simply explained for the NRI Thank you so much for all the information provided here I found it very helpful indeed. Looking forward to more useful interesting information for the NRI. Thanks again!

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