Converting existing Bank account to NRO / NRE account

[Sudhaker]

Hi Folks,

I am planning to move to UK in couple of months and would like to know the best practices in terms of converting existing Bank accounts to NRE / NRO accounts so that I can keep them active and have them used for my investments in India.

Q1: Can I convert existing accounts to NRE / NRO or should I close the existing accounts and open new account?

Currently I have active accounts with HDFC (current salary account), AXIS (Savings account linked to my Zerodha Demat), SBI (Emergency Funds only with Sweep enabled for better returns).

I would like to continue my investments in Stocks and Mutual Funds via Zerodha which is linked with my Axis account and use HDFC account for any remittance from UK.
I am thinking it would be better to convert Axis to NRO and HDFC to NRE.
Q2: What is your expert opinion on the same?

 

[ShavirB]

1. You can convert your existing account to NRO Account but not to NRE Account since NRE Accounts can only receive money in Foreign denominations and interest is non-taxable.

2. You can convert your Axis Savings Account to NRO Account and continue using that as is. You will need to Inform ZERODHA of the change in account status from INR to NRO - they'll ask you to submit some documents (Modification Form, FEMA Declaration, FATCA Declaration, DDPI, etc.)

3. If you have valid VISA for more than 182 days, you can open an NRE account before shifting abroad but you'll need to fund that account with USD, GBP, etc to make it fully operational.

 

[Sudhaker]

Thanks for the update @ShavirB Can you also suggest what should I do with my existing credit cards. Can I still continue using them and pay the bills via NRO account or will there be any conditions on using Credit card once I move abroad?

 

[ShavirB]

No, you cannot continue using your Credit Card as is. You need to get that updated too.

Ideally if your Credit Card and Savings Account are in the same Bank, once you convert your INR Savings Account to NRE Account, your Credit Card will automatically get converted to NR Credit Card. If that is not the case, you can get your existing Credit Card updated to NR Credit Card by submitting in the application and relevant docs (similar to Savings A/C).

Once you do that, you can pay your monthly bills using your NRE/ NRO Account.

 

[Sudhaker]

Will the NR credit cards have same benefits and rewards as a domestic card?
Also is there anything else that I need to do in financial world before moving abroad other than updating bank account, credit card and demat accounts?
What happens to PF, NPS, Term and Medical insurance.
Is there a checklist of things that one need to do while moving abroad, if not can we compile one, that would be useful for many I believe.

 

[ShavirB]

Will the NR credit cards have same benefits and rewards as a domestic card?
Also is there anything else that I need to do in financial world before moving abroad other than updating bank account, credit card and demat accounts?
What happens to PF, NPS, Term and Medical insurance.
Is there a checklist of things that one need to do while moving abroad, if not can we compile one, that would be useful for many I believe.

Yes your NR credit card will continue to have similar benefits and rewards as your domestic card.

Not sure if there is a checklist. If you plan on spending some time in India in the future - it makes sense to have a good Medical Insurance in India especially given the cost of Medical Treatments in India v/s abroad. You can continue to hold the Term Insurance also.

If you wish, you can continue to invest in both NPS and EPF - but please know that you can only invest in tier-1 option of NPS as a NRI.

 

[Sudhaker]

Do I need to do anything related to existing Mutual Funds and I hope I can continue SIP through the converted NRO account (in this case axis) via Zerodha (also after conversion) or are there any restrictions on investing in MFs after moving abroad?

 

[Ramesh181]

Do I need to do anything related to existing Mutual Funds and I hope I can continue SIP through the converted NRO account (in this case axis) via Zerodha (also after conversion) or are there any restrictions on investing in MFs after moving abroad?

You can still continue your SIPs.

 

[ShavirB]

Do I need to do anything related to existing Mutual Funds and I hope I can continue SIP through the converted NRO account (in this case axis) via Zerodha (also after conversion) or are there any restrictions on investing in MFs after moving abroad?

yes can invest normally in MFs. However please note that you can't do intraday trading and currency trading

 

[prometheus]

@Sudhaker @ShavirB Wouldn't it be better to open an account in the UK and keep all the Indian accounts as is? Assuming remittance received via UK will be converted to INR in Indian Accounts and utilize net banking out there for deploying money via the broker?

 

[ShavirB]

No, you should convert your Resident Accounts into NRE/ NRO or close them.. Having a Resident Account as an NRI is in direct violation of FEMA laws and may attract certain penalties

 

[prometheus]

No, you should convert your Resident Accounts into NRE/ NRO or close them.. Having a Resident Account as an NRI is in direct violation of FEMA laws and may attract certain penalties

Is this even applicable for people who go for a limited time to earn outside based on work permit? What if the person comes back after few years in that scenario would it be beneficial? @ShavirB

 

[Bharatiya Nagrik]

Is this even applicable for people who go for a limited time to earn outside based on work permit? What if the person comes back after few years in that scenario would it be beneficial?

My personal experience - was in UK for 1 year in 2016-2017. Did not change any account. Just filled the FATCA forms requested by the banks and other financial institutions (mutual fund entities).
Had a UK account opened after moving there. Remitted money to my indian accounts through registered remittance service providers in UK. Not aware what the latest rules are.

 

[prometheus]

My personal experience - was in UK for 1 year in 2016-2017. Did not change any account. Just filled the FATCA forms requested by the banks and other financial institutions (mutual fund entities).
Had a UK account opened after moving there. Remitted money to my indian accounts through registered remittance service providers in UK. Not aware what the latest rules are.

Yes this seems more feasible too and less time consuming as well, will have to inquire in bank, hopefully RBI has not introduced any new laws for this.