More Indians are moving to overseas due job and educational purposes. There are many arrangements that you need to make before moving to another country. The decision of managing your finances is another essential thing that you need to decide. Usually, the NRIs who are planning to settle down abroad don’t convert the savings account, rather they choose to close it. In case, you are an NRI who is generating income in India as well, then converting your existing account in an NRO account or Non-resident Ordinary account is the best option for you.
Best reasons to convert your bank savings account into NRO account
When you convert your savings account into an NRO account, you can easily manage India-based income that is mostly generated from rent, pension, business dealings, investments, etc. The best thing about the NRO account is that you can deposit funds in Indian currency. There are several reasons to opt for an NRO account. Here are some reasons are given below:
- Minimal documentation
You are converting your existing savings account into an NRO account, so only a few documents are required. First, you need to submit documents that prove your residential status like Passport, Voter ID, Aadhaar card, Driver’s license, etc. Along with these, you have to submit documents that proof of NRI status including a valid visa, OCI or PIO card, work permit or student visa, etc.
While converting your savings account, you need to submit documents for proving your overseas address such as utility bills, electricity bills, telephone addresses, etc. Further, you are required to provide your recent passport size photographs. As per Indian tax laws, one needs to spend less than 182 days outside India in a financial year to be recognized as an NRI. You must be recognized as an NRI to convert your account into an NRO account.
- Taxation and repatriation
Both the income and the interest earned through an NRO account is taxable. An NRO account is subject to wealth tax, gift tax, and income tax. The tax claimed on the NRO account can be deducted based on the current TDS rate. You can also avail DTAA or Double Taxation Avoidance Agreement in order to avoid taxation.
This is a rupee accumulated account, so there is no exchange rate risk. Besides, you can avail of a loan against an NRO account. However, your loan approval depends on your NRI status, qualification, income, loan amount, etc. But it is forbidden to use a loan for investing agriculture land or real-estate business.
- Procedure of conversion
The process of converting the savings account into an NRO account is very easy. One needs to inform that where they hold the residential savings account that they have moved abroad. Therefore, they wish to convert their account into n NRO account. You are required to fill up the conversion form. The conversation form asks for all information, including the KYC details, overseas address, point of contact, etc. You can either go to your nearest branch to collect the form or fill up online on the website of the bank where you have the residential account.
The conversion form should be self-attested. Make sure you submit all the documents like visa permit, passport, OCI or PIO card, etc. along with the form. In case your residential account was a zero-balance account then you need to convert it into a minimum balance account. After the bank receives all your documents, they take some time to verify the information. After approval, your savings account is converted into an NRO account with the same account number.
After you submit all the documents, the bank verifies your documents and takes some time to approve the request. Your residential savings account is converted into an NRE account, but the account number remains the same.
- Advantages of converting to NRO account
It is essential to know the benefits before you convert your residential savings account into an NRO account. Though an NRO account, you can park your India-based income in Indian currency. You can transfer money to an overseas account with a competitive rate of exchange. You need to make an Indian nominee who can access your account on your behalf.
However, the principal amount and interest earned through the NRO account are taxable. But you can avail of the Double Taxation Avoidance Agreement or DTAA to avoid taxation. You can access the bank account through net banking. The interest earned on the NRO account varies depending on bank to bank.
You need to remember that while converting from resident savings account to an NRO account your bank takes some transaction charges. The interest that you earned through an NRO account is entirely repatriable after tax is deducted. For conversion, you need to provide your overseas address proof for the processing of documents and to drop-off the forms. The most significant reason for opting for an NRO account is that you can deposit money in Indian rupees.