Query 1]

An NRI wants to open a resident saving bank account with our Branch .What are the guidelines. Inward remittances are exempt from IT. What is tax implication of an NRI in case of Ordinary Savings Bank as he is allow to open only NRO and not ordinary Savings Bank account? To avoid tax liability, one of our NRI customers wants to open Ordinary resident SB account and to submit 15G for the deposit he intends to make (Not an inward remittance). What are the guidelines for PPF account in the case of NRI? Please clarify. []


The world is getting increasingly smaller and the increasing number of Indian professional are moving for employment & better opportunities to multiple countries across the globe. With the change in residential status from resident to non-resident, the rules & regulations also changes. One of the most basic elements of such change is with regard to saving bank account. Most of the people who are not aware of it will invite penal consequences. A non resident Indians are not allowed to maintain the regular bank account- whether saving or current. In simple words, it’s illegal to hold savings bank account for NRI’s. A person who is resident in India can only submit form No. 15G. Non Resident Indian under the Income Tax Act-1961 cannot submit form No. 15G.

As per FEMA & RBI regulation, when a status changes to NRI, the resident savings account has to be either closed or has to be converted in to a NRO (Non-resident Ordinary) account. [All income which is receivable in India such as rentals from property, investments, pension etc has to be deposited in this account and any payment towards insurance premiums or EMIs on loans in India has to be mandated from NRO account].

For converting the account, account holder needs to inform the banker on status change within a reasonable time period. The bank then will designate such existing resident account to NRO account and all other things will continue to remain as it is.  Funds from NRO account are now easily repatriable up to $ 1 million USD with a pre-condition of submitting a certificate from Chartered Accountant by the concerned account holder.

It may be noted that NRI have also an option to open an NRE (Non-resident external) account. Fund in the NRE account is freely repatriable whereas NRO account has restricted repatriability of 1 million USD as mentioned above. Also, NRE account is Tax free (no Income tax, wealth tax and gift tax) in India whereas interest earned in NRO account are subject to income tax according to applicable income tax bracket and are also subject to applicable wealth tax and gift tax.

PPF Account:

NRIs are not allowed to open fresh PPF account. But if NRI have an existing PPF account, it can be continued. So, it may be ensured to deposit at least Rs. 500/- in a financial year to keep the account status active. It may be noted that NRIs are not allowed to extend their PPF account. So, on maturity, NRI should withdraw the proceeds and should not extend the account even by mistake.

Query 2]

I need advice for my property sale in Pune (2 BHK Flat situated in Pune). I am working in Bahrain (Overseas) & going to sale my property in Pune at around Rs. 40 Lacs. I would like to receive this amount in my NRO account & want to know  that, if credit these Rs. 40 Lacs in my NRO account, would that cause any Income tax department enquiry? Also, do I need to pay income tax for this property sale & how I can get reimbursement of Income tax once paid? If no, whether any tax saving option is there? Please advise, how to credit this amount in my Bank account & what should be done in terms of Income tax department enquiry. []


Any income accruing in India or received in India or deemed to accrue or arise in India or through transfer of a capital assets situated in India, is taxable in India. Resultantly, any income of NRI from transfer of property located in India is taxable in India. Tax implication on Income arising from sale of house/flat would depend upon the period of holding.

If the property in India is sold within 36 months from the date of its purchase, then the income would be treated as short-term capital gains (STCG) & is taxable at the rate applicable to an individual according to the personal income tax slab. However, if the property in India is sold after 36 months from the date of its purchase, the income would be treat as Long Term Capital Gain (LTCG). It is taxable at a flat rate of 20%. Remember, for calculating LTCG, the benefit of indexation on the cost of acquisition & improvement is also available.

As per section 195 of the Income Tax Act 1961. Due to your NRI status, the resident buyer will have to deduct Tax at Source (TDS) from the sales proceeds. And only the balance of sale consideration would be paid to you.

With reference to certain specific issues in your query, it may be noted that:
a] Sale of property in India attracts income tax.

b] If your tax liability is lower than TDS done, you can get back the refund of excess TDS after filing your income tax return.

c] NRI can also save LTCG tax on sale of property by investing the amount of LTCG. In certain specified bonds issued by NHAI or REC or by investing the amount in another house property in accordance with section 54 of the Income Tax Act 1961.


[The author is a practicing Chartered Accountant from Nagpur. Readers may send their direct tax related queries at SSRPN & Co, 10, Laxmi Vyankatesh Apartment, C.A. Road, Telephone Exch. Square, Nagpur-440008 or email it at If you wish to unsubscribe from the mailing list, please reply back “unsubscribe” on the same email id]