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Business News/ Money / Personal Finance/  What is the rule on bank accounts for overseas Indian students?
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What is the rule on bank accounts for overseas Indian students?

As per the guidelines issued by Reserve Bank of India, banks are permitted to include an NRI as a joint holder with the resident account holder, provided a few conditions are met.

A student who intends to live abroad for an extended period must intimate the bank suitably. (iStockphoto)Premium
A student who intends to live abroad for an extended period must intimate the bank suitably. (iStockphoto)

Is it mandatory for an Indian resident studying overseas to convert bank savings account in India to non-resident ordinary (NRO) or non-resident external (NRE) account? Also, what conditions will determine one’s residency status for tax purposes?

—Kaushik Ghosh

Residents who leave India with the intention of staying abroad for an extended period of time must intimate their bank of their intention and then the bank will convert their resident bank accounts to foreign currency accounts. Therefore, a student who intends to live abroad for an extended period must intimate the bank suitably.

As per the guidelines issued by Reserve Bank of India, banks are permitted to include an NRI as a joint holder with the resident account holder, provided a few conditions are met. The NRI relative can only use this account for domestic payments and shall not create any beneficial interest for himself.

Your residential status must be determined as per the Income Tax Act for each financial year in the following manner. You must meet at least one of the following conditions and two more additional conditions that will determine your tax residency status:

First, you are in India for 182 days or more in the relevant financial year; or you are in India for 60 days or more in the said financial year and 365 days or more in the four FYs immediately preceding the relevant financial year. In the second condition, the period of 60 days is substituted by 182 days for an Indian citizen or a person of Indian origin, who lives outside India and comes to visit India in the said financial year.

The same applies for a citizen of India who leaves the country in the said financial year for employment outside India or as a member of a crew of an Indian ship.There is also another rule of deemed residency. An individual who is a citizen of India who is not liable to tax in any other country or territory and has total income, other than from foreign sources, exceeding 15 lakh during the said FY, shall be a deemed resident of India.

For a citizen or a person of Indian origin who comes on a visit to India, if the total income, other than income from foreign sources, exceeds 15 lakh, the 60 days are substituted by 120 days; in any other case, the 60 days are substituted by 182 days. Such persons are considered as deemed residents.

The two additional conditions, mentioned earlier, are: You are a resident in two of the 10 financial years immediately preceding the relevant; you are in India in the seven years immediately preceding the relevant financial year for 729 days or more. If you meet any of the first set of conditions and both the additional conditions, you shall be considered a resident in India. If you meet any of the first set of conditions, but not both the additional ones, you shall be considered a resident, but not ordinarily resident in India. If you do not meet any of the first set of conditions, you shall be an NRI for tax purposes.

Archit Gupta is founder and chief executive officer, Clear.in.

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Published: 06 Jul 2023, 10:24 PM IST
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