What are the consequences of holding a normal account after becoming and NRI?

Question

What are the consequences of holding a normal account after becoming and NRI?

What are the consequences if some one is found out?

Thank you.

Answer 1

Normally, you should inform your bank so that your bank account becomes NRO account. TDS will be deducted at 30% instead of 10%.

For NRI accounts NRO, NRE and FCNR, read http://mytaxes.in/index.php?topic=150.0

Answer 2

All resident accounts of a person with banks in India will automatically be treated ordinary non-resident accounts on his becoming non-resident.

Similarly NRO account may be redesignated as resident accounts on the account of holder becoming resident in India. It may be noted that residential status of a person will be determined as per the definition under Foreign Exchange Regulation Act, 1973.

When an Indian national or person of Indian origin residing in India leaves India for a foreign country (other than Nepal and Bhutan) for taking up employment, business or vocation outside India, or for any other purpose, indicating his intention to say outside India permanently or for an indefinite period, he becomes a person resident outside India. His bank account, if any, in India is designated as an Ordinary Non-resident Account (NRO Account). Such accounts can also be opened with funds remitted from abroad. As funds in this type of account are non repatriable, they cannot be remitted abroad to the account holders or transferred to their NRE Accounts without the Reserve Bank’s prior permission. Interest earned on these deposits is not exempt from Indian Income-tax.

The accounts may be maintained in the form of savings or current or term deposit accounts. The accounts can also be opened jointly by non-residents with their close relatives resident in India and operations thereon by the resident account holders can be made freely. If an account is used only for the personal or business needs of the resident account holder, it may be opened jointly even with a person who is not a close relative but this needs prior permission of the Reserve Bank.