It is a big confusion, on the changes in NRI bank accounts in Investments especially in Mutual Funds. Let us try to solve this by reasoning for the cases. It is sure that when a person is working outside India, he will undergo changes in status. These changes must be reflected in investments so that he is on the right side of the law. Here are the changes in the bank account & investments for NRIs.

NRI is NOT one but 2 status in itself

Don’t get confused with the headline above. It is the demarcation of money flow for an NRI.

The rules of NRIs remain the same. We have already discussed that a Resident becomes NRI on passing certain conditions as laid in Income Tax of India act 1961 &

NRI has 2 sources of income:

• Foreign Income: Can be in foreign exchange. This income gets credited through an NRE account. This income is repatriable without restrictions
• Indian Income: Is in Indian Currency. It gets credited in NRO accounts. This income is repatriable but with restrictions & approvals.

Since the income streams are separate – the idea to restrict certain bank changes is to KEEP THE TWO MONEY SEPARATE.

When do you want to changes Bank Details or changes in NRI Bank Accounts?

NRI would like to change bank in the following 3 situations:

• When your status changes from Resident to NRI.
• Status changes from NRI to Not ordinary Resident (RNOR)
• Again when status changes to Resident again.

Let’s deal with them one by one for better understanding.

Rule for Changes in NRI Bank Accounts & Investments

Status changes from Resident to NRI

When the status change to NRI, 2 possible scenarios will happen:

You have existing investments: The Savings Bank will change to NRO only. As you know NRI is not allowed to hold Savings Bank Accounts.

For New Investments: In case you want to make new investments from funds available with the NRO account, you may continue so in the same folios.

In case you do not have earnings in India, or Indian sources, you have to open new folios with NRE bank details. The new investments (lumpsum & SIP) will be from NRE account in the new folio.

The existing investment folios made through SB account can change to NRO.

They can NEVER change to NRE, to facilitate Repatriation.

Status Changes from NRI to Not Ordinary Resident (RNOR)

When you have returned to India, for the next 2 years you may enjoy NRI benefits by converting your accounts to RNOR status.

For New Investments & existing investments: The bank accounts will remain the same, only they will be designated as RFC (Resident Foreign Currency) accounts. The new or existing investments can be made or continue from NRE- RFC or NRO RFC in separate folios.

Status changes from NRI to Resident again

You have to give up NRE and NRO accounts. They will be designated as Savings or Current as the case may be.

Both changes NRE to SB & NRO to SB are allowed.

What if you are never going to be a Resident?

This case may arise and you wish to settle abroad. You may like to transfer your Indian Investment with you.

In this case, you cannot get a withdrawal in your NRE account.

First, you need to withdraw and get your proceeds in the NRO account.

Then this amount can be transferred to the NRE account, using the banking channel and adhering to Form 15CA & CB requirements from a Chartered Accountant.

Also, know that repatriation has an overall limit set by FEMA LRS Scheme (Liberalised Remittance Scheme) currently at 2.5 Million USD Per Year.

How to make Change in Account Type by NRI / Changes in NRI Bank Accounts

An investor may want to changes in NRI bank accounts type in case of change of status as well.

An investor needs to submit Change of Bank Details form available on the website or at any of our Investor Service Centre.

The form needs to be submitted duly signed by all unit holders as per the mode of holding. This also needs to be accompanied with any one of the following as a Proof of Bank for both old and new bank account:

• Canceled cheque
• Bank account statement or Pass Book with entries not older than 3 months
• Banker’s Letter

The below table provides various scenarios of change in account type:

As discussed above, the table clearly mentions which bank changes are allowed and not allowed for NRIs.

I hope this article helps you dealing with changes in mutual fund holdings while you transit between different status changes in life.

Do ask if you have a query in the comments section below.

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