Top 10 Mistakes NRIs & How to Avoid Them
Managing Indian bank accounts as an NRI (Non-Resident Indian) requires following specific rules laid out by the Reserve Bank of India (RBI). Many NRIs unknowingly make banking mistakes that can lead to penalties, frozen accounts, or tax complications. Here are the top 10 mistakes NRIs commonly make and how to avoid them:
- Not Converting Resident Account to NRO After Moving Abroad
Once your residential status changes to NRI, continuing to use a resident savings account becomes non-compliant.
Solution: Inform your bank and convert the resident account to an NRO (Non-Resident Ordinary) account immediately after your status changes. - Using NRE Account for Indian Income
NRE (Non-Resident External) accounts are meant only for income earned outside India.
Solution: Route all Indian income like rent, dividends, or pension through your NRO account, not NRE. - Not Updating KYC and Contact Details
Outdated KYC information or an Indian phone number that’s no longer in use can result in account freezes.
Solution: Regularly update your KYC, foreign address, and contact details with the bank. - Having Multiple NRE/NRO Accounts Without Purpose
Some NRIs open accounts with several banks without a need, leading to tracking issues and non-compliance.
Solution: Consolidate your accounts and keep 1–2 active accounts with banks that offer solid NRI services. - Ignoring Taxation on NRO Account Interest
Interest earned in NRO accounts is taxable in India and subject to TDS (Tax Deducted at Source).
Solution: File income tax returns if eligible and consider using DTAA benefits to claim credit in your country of residence. - Not Repatriating Funds Properly
NRIs often transfer money abroad without following proper procedures, especially from NRO accounts.
Solution: Use Form 15CA and 15CB from a chartered accountant when repatriating from NRO. NRE accounts allow full repatriation without paperwork. - Leaving Dormant Accounts Unattended
Dormant or inactive accounts may lead to complications, missed bank notices, or even fraud.
Solution: Close unused accounts or set a yearly reminder to review and reactivate if needed. - Not Assigning a Power of Attorney (POA)
Handling financial matters from abroad can be tough without someone to act on your behalf.
Solution: Appoint a trusted POA holder in India who can manage urgent banking and investment needs. - Missing Nomination in Accounts
NRIs often forget to nominate family members, risking complications in case of emergencies or death.
Solution: Add or update a nominee for each account to ensure smooth transfer of funds if something happens to you. - Assuming All Banks Offer Equal NRI Services
Not all banks are equally equipped for NRI customers. Choosing a bank without dedicated NRI services can lead to frustration.
Solution: Choose banks that have dedicated NRI desks, global access, 24/7 support, and international remittance tools.
Avoiding these 10 mistakes can save NRIs from regulatory hassles, tax troubles, and emotional stress. Proactive management and compliance with RBI norms are key to maintaining a strong financial base in India while living abroad.