People moving abroad ask us this before almost every relocation, so the TAXAJ team is answering it here.
Someone has taken up a job outside India and will live there for the next few years. They still have resident savings accounts in India. What must they do with them?
Under FEMA, once you become a person resident outside India, your resident savings accounts must be redesignated as NRO accounts. Tell your bank promptly. It needs your overseas address and proof of the change, such as a visa or employment letter.
- NRO account: for income earned in India, such as rent, dividends or interest. Interest is taxable in India and the bank deducts tax at source at 30% plus surcharge and cess, unless you claim a lower treaty rate with a tax residency certificate. Repatriation abroad is allowed up to USD 1 million a financial year, with the bank's remittance forms and, where required, a CA certificate.
- NRE account: for money you bring in from abroad. It is fully repatriable, and the interest is exempt from Indian income tax while you are a non-resident for tax purposes.
Two separate tests apply. FEMA status changes when you leave to take up a job abroad. Income-tax residential status depends on the number of days you spend in India in the year. You can be non-resident under one and resident under the other in the year you move, so check both before you file.
More guides are in FEMA and NRI on TAXAJ Learn.