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January 14, 2000


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"For how long can I continue my NRE account after I return to India?"

The Rediff Money Channel presents everything you wanted to know about personal banking, but didn't know whom to ask. Kannan Ranganathan, who has over ten years of experience in banking and financial services, is here to remove all your doubts.

Readers Note: Please keep your questions short.

In an earlier reply, it was stated that an NRI could retain his NRE account even after returning to India and losing his NRI status. Can you please advise for how long he can keep this account?

Pran Parashar

As per para 13B.12 of the Exchange Control Manual, NRE accounts should be redesignated as resident rupee accounts or as RFC accounts (if eligible), at the option of the account holder immediately upon the return of the account holder to India if the authorised dealer is satisfied that he has returned to India for taking up employment or for carrying on a business or vocation or for any other purpose with the intention of residing in India for an uncertain period. Where the account holder is only on a short visit to India, the account may continue to be treated as an NRE account even during his stay in this country.

In respect of funds held in fixed deposits in NRE accounts, interest will be payable at the rate originally fixed, provided the deposit is held for the full term even after conversion into resident account.

I am an NRI planning to return to India for good in April 2000. I have NRNR accounts worth Rs 24 lakh maturing at dates varying from two months to two and a half years. I have to inform RBI about my change of residence. Can you let me know what will be the position of these accounts? Will my accounts be converted into resident fixed deposit accounts? Will there be a penalty for closing NRNR accounts prematurely? What will be the best option?

K V Mallya

NRNR accounts will be converted to resident accounts on the change of the status of the account holder from non-resident to resident. However, the higher rate of interest as per the original contracted rate would continue till the maturity of the deposits. So let them continue till maturity.

I am staying in the US for the past two years and plan to return to India by end of 2002. I have opened an NRE account in India. I am planning to put all my savings money in that account jointly held by my brother and I in India.
These are my questions:
1) Is the money kept in that account taxable?
2) When I return to India, how long can I keep that money in NRE account?
3) if I transfer the money to a resident account after I return to India and lose the NRI status, would it be taxable?

Prasad Prasad

The opening of a joint account with a person resident in India is not permissible. Deposit and interest are exempt from tax in India. On return the account will be converted to resident rupee accounts and would be taxable as per the applicable tax rates.

I came to the US in January 1992 as a student. I have visited India (for 30 days ) in 1992 and 2.5 months in 1994. I have not visited India since then.
My questions are:
1) Am I an NRI?
2) I would like to open a savings account from which I can withdraw dollars in the US and my father should be able to withdraw rupees in India. Does such a bank account exist? If yes, what is the it called? Can I open it from the US?

Pidatala Kris

1) You seem to have completed your studies and taken up employment there. You have become a Non Resident from the date of employment.

2) There is no account that fulfils your requirements. You would have to open a dollar account in the US and remit funds to your father whenever he requires it.

I am currently in a foreign country since the last one year on temporary work visa and I think it gives me an NRI status. How do I transfer my earned money to India? Can I open an NRE account while I am here and still continue with it after my return?

Murli Rao

Yes, you would classify as an NRI. Earned money could be remitted to India through the correspondent of your bank in India. You may open an NRE account, but would have to convert it to a normal resident account on your return.

I have been an NRI for the last six years. If I return to India, then is it true that I will have NOR status for the next seven years. Does this imply that I can continue to hold overseas accounts without any tax implications?

Rajiv Pandey

A non resident Indian becomes a resident if he returns to, or stays, in India for carrying out employment, a business/vocation or intends to stay in India for any other purpose for an uncertain period. In a notification dated September 7, 1992, the RBI has granted general permission to persons who have come, or returned, to India after a minimum continuous stay of one year abroad as non residents to maintain and operate foreign currency accounts abroad provided that the funds held in such accounts were acquired otherwise than in contravention of the provisions of FERA 1973, while they were resident outside India.

I am an Indian student studying in the US on F1 visa. Since F1 visa holders are supposed to be in the US for a specified period of time, I don't qualify as an NRI. However, since I am allowed to work part-time in the university, I do have some dollars. I would like to keep these dollars with Indian banks like NRIs do. Also it would be useful if my parents could withdraw from such an account in India. Many different kinds of accounts cater to these needs for NRIs, but I cannot benefit from that although my Ph. D. course is for five years. The only way to keep money in dollars seems to be to keep it in America and convert it to rupees whenever I want to send money to India. Is that the best thing to do or do you have a better suggestion? Is there any kind of dollar account that can be opened in India by someone like me who lives in US but is legally not an NRI?

Saurabh Sethia

I concur with you. You can only open a dollar account in the US and remit funds to your parents when needed. In any case even an NRI can only open an FCNR deposit account and cannot keep money in a savings account in dollars.


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