Mistake 1 — Keeping your resident savings account after becoming an NRI
This is the single most common FEMA violation among NRIs, and it is almost always unintentional. The moment you become a person resident outside India under FEMA — which happens the day you move abroad with the intention to stay — your ordinary resident savings account becomes non-compliant. FEMA does not give you a grace period to sort it out at your convenience; the obligation to redesignate starts immediately.
The bank will not flag it. The account will keep accepting salary credits and paying bills exactly as before. The problem surfaces later — during a tax audit, a repatriation attempt, or a property sale — when someone traces the account history and asks why it was operating as a resident account for two years after you were living in Canada. Penalties are civil and usually compoundable, but fixing a multi-year historical breach costs far more time and money than an early redesignation.
Tell your bank in writing that you have become an NRI and ask for the resident savings account to be redesignated as an NRO account. This is a form-and-KYC exercise, not a new account opening. Existing fixed deposits generally continue to maturity but must be redesignated at that point. Do this within weeks of moving — not months.
Mistake 2 — Mixing NRE and NRO funds (crediting Indian income into NRE)
NRE and NRO accounts look similar from the outside — both are Indian bank accounts, both show a rupee balance — but they operate under fundamentally different rules. NRE accounts are for money you earned abroad and brought to India: interest is tax-free in India, the balance is fully repatriable, and FEMA treats it as foreign money temporarily parked here. NRO accounts are for money that arose in India — rent from your flat in Pune, a pension, dividends from an Indian portfolio. That money is taxable in India and repatriation is capped at USD 1 million per financial year with proper documentation.
The mistake is crediting Indian income — rent, pension, interest on FDs held in India — into an NRE account. In doing so you convert money that FEMA considers India-sourced (and therefore subject to the repatriation cap) into money that appears freely repatriable. Banks audit NRE credits, and an audit that finds Indian-origin income sitting in an NRE account is a FEMA contravention, regardless of whether tax was paid on it.
| NRE Account | NRO Account | |
|---|---|---|
| Source of funds | Foreign income brought to India | Income arising in India (rent, pension, dividends) |
| Interest taxable in India? | No — exempt | Yes — ~30% TDS applies |
| Repatriation | Fully repatriable, no cap | Up to USD 1 million per financial year with Form 15CA/CB |
| Joint holding | Only with another NRI/OCI | Can be joint with a resident Indian |
Keep the accounts separate and route money correctly at source. Ask your tenant to pay rent into NRO. Credit your overseas salary into NRE. If you are unsure which account a payment should enter, default to NRO — you can always speak to a CA, but you cannot un-contaminate an NRE account.
Mistake 3 — Ignoring FATCA and CRS self-certification
FATCA (the US Foreign Account Tax Compliance Act) and CRS (Common Reporting Standard, its global equivalent) require Indian banks to collect a self-certification from NRI account holders declaring their country of tax residence. This is not a one-time exercise. If you move from the UAE to the US, or if your certification lapses and the bank's records become stale, the bank is required to freeze outbound transactions until the self-certification is refreshed.
This trips up NRIs most often at the worst moment — when they have a time-sensitive repatriation pending. The transfer is initiated, the compliance system queries the stale FATCA status, and the bank places the account on hold. The NRI spends three days chasing branch staff who are not sure which form is needed, while the transfer deadline approaches.
Log into your NRI banking portal once a year and confirm your FATCA/CRS self-certification is current. If you have changed countries of tax residence, notify the bank immediately and submit a fresh self-certification. Most banks now have a digital path for this — it takes under fifteen minutes and prevents the account from being placed on hold at an inconvenient moment.
Mistake 4 — Filing Form 15CA before the CA issues Form 15CB
When an NRO account holder wants to repatriate more than Rs 5 lakh in a financial year, the bank requires two forms before it will release the funds: Form 15CA (a declaration filed online on the income-tax portal) and Form 15CB (a certificate signed by a practising Chartered Accountant confirming the tax position). The 15CB must exist first, because 15CA must reference it. File them out of order and they do not reconcile, the bank returns the file, and the transfer stalls.
Non-taxable transfers (covered by a specific RBI exemption) may use Part D of 15CA and skip 15CB, but the bank still wants to see the declaration. Confirm which part applies with your CA.
Mistake 5 — Leaving NRE fixed deposits open after returning to India
NRE fixed deposits earn tax-free interest — but only for as long as you remain a non-resident under FEMA. The moment you return to India permanently and resume resident status, your NRE accounts (and the tax exemption on their interest) must be redesignated. An NRE FD sitting open six months after you have moved back is a FEMA contravention, and the interest that accrued after your return may become taxable, sometimes with interest on the unpaid tax.
Banks, again, do not notify you. The FD rolls over automatically, the tax-free interest keeps accumulating, and the account looks identical to before. It is only when you later tell your bank that you are now a resident — or when a tax assessment picks up the foreign-income claim — that the discrepancy surfaces.
When you decide to return to India permanently, notify your bank at the same time you book flights. Ask for all NRE and FCNR(B) accounts to be redesignated as resident accounts or converted to RFC (Resident Foreign Currency) accounts. Any NRE FD that matures after your return should be converted to a regular resident FD — the rate may change, but the compliance position will be clean.
Mistake 6 — Not having a nominee on NRI bank accounts
A nominee on a bank account is not a legal requirement under FEMA. It is, however, the difference between a straightforward inheritance and a probate proceeding that can take years. An NRI account without a nominee, held by someone who passes away while living abroad, requires the legal heir to produce succession certificates or letters of administration issued by an Indian court before the bank will release the balance. This can take two to three years and cost a significant fraction of the account balance in legal fees.
The fix costs nothing and takes ten minutes. Most NRI banking portals allow you to add or update nominees online. If yours does not, a branch visit or a signed letter from abroad usually does it.
Mistake 7 — Operating without an NRE account (keeping all money in NRO)
Some NRIs default to routing everything — including their overseas salary — through an NRO account, because NRO is what the bank opened first or because someone told them it was simpler. The cost of this approach is significant. NRO interest is taxable in India at roughly 30% TDS. NRO funds face the USD 1 million per financial year repatriation cap with paperwork. Money that could have sat in an NRE account — tax-free, fully repatriable, earning a competitive rate — is instead earning a taxable return and requiring documentation to move abroad.
NRE and NRO accounts are not mutually exclusive. Most NRIs should hold both: NRE for foreign income brought to India, NRO for India-sourced income. The setup is straightforward and most banks can open an NRE account alongside an existing NRO account without any change to your KYC.
Mistake 8 — Not updating the bank when your residential status changes mid-year
FEMA residency is not a year-end concept — it changes the day you move. So does your obligation to update your bank. An NRI who returns to India in October and does not notify the bank until the following April has been operating non-compliant accounts for six months. Conversely, someone who moves abroad in June and keeps their resident account open until the December branch visit is in the same position.
Tax residency is different — it is determined at year-end based on days counted. But the bank account obligation is FEMA-based and real-time. A practical rule: the week you move (in either direction) is the week you contact your bank. You do not need to wait for your residential status to crystallise under the Income-tax Act — your FEMA position is already clear.
- Redesignate your resident savings account to NRO the week you move abroad — not when you get around to it.
- NRE is for foreign income; NRO is for Indian income. Never credit rent, pension or dividends into an NRE account.
- Keep your FATCA/CRS self-certification current — stale records trigger account freezes at the worst possible moment.
- For NRO repatriation above Rs 5 lakh, get Form 15CB from your CA first, then file Form 15CA citing it.
- When you return to India permanently, redesignate NRE and FCNR(B) accounts immediately — the tax exemption stops the day you return.
- Add nominees to every NRI account. It is a ten-minute fix that prevents years of probate.
- Most NRIs need both NRE and NRO accounts — defaulting to NRO alone costs you tax-free interest and easy repatriation.
- Update your bank the week your residential status changes under FEMA — not at year-end.
Frequently asked questions
How long after becoming an NRI can I keep my resident savings account?
There is no grace period under FEMA. The obligation to redesignate to NRO starts the day you become a person resident outside India — which is the day you move abroad with the intention to stay. In practice, banks accept redesignation requests for a reasonable period, but the sooner you act the cleaner your compliance record.
Can I transfer money from NRO to NRE?
Yes, but only after taxes on the NRO balance are paid, and within the USD 1 million per financial year repatriation limit. The transfer requires the same Form 15CA/CB documentation as any outward NRO remittance. Transferring money from NRO to NRE does not bypass the cap — it counts against it.
What happens if I accidentally credit rent into my NRE account?
It is a FEMA contravention — Indian-sourced income is not permitted in an NRE account. The practical fix is usually a compounding application to the RBI, where you disclose the breach, pay a penalty and regularise. Catch it early: the longer the money sits in the wrong account, the more the record shows.
Is FATCA only relevant for NRIs in the US?
No. FATCA applies specifically to US persons (citizens and green card holders), but CRS is the equivalent for about 110 other countries. Indian banks collect self-certifications under both frameworks, so NRIs everywhere — not just in the US — need to keep their self-certification current.
Can NRI bank accounts be held jointly with a resident Indian?
NRO accounts can be held jointly with a resident Indian on a 'former or survivor' basis. NRE accounts can only be held jointly with another NRI or OCI — not with a resident Indian. This is a common source of confusion when an NRI wants to add a parent or sibling who lives in India.
Do I need to close my NRE account when I return to India permanently?
Not immediately close it — but you must redesignate it as a resident account (or convert to an RFC account for foreign currency balances) as soon as you resume resident status. Continuing to hold it as an NRE account after returning is a FEMA violation and the interest earned after your return may become taxable.
What is the penalty for keeping a resident savings account after becoming an NRI?
The contravention is civil under FEMA, and most cases are compoundable — you disclose the breach to the RBI, pay a penalty, and regularise. The penalty can go up to three times the amount involved where quantifiable. In practice, straightforward redesignation cases attract far lower penalties, but the cost in time and professional fees usually exceeds what a prompt redesignation would have cost.
This article is for general information only and reflects rules current as of 2026. It is not legal, tax, or financial advice — rules, rates and procedures can change, so please confirm the current position with a qualified professional before acting.