Should NRIs Keep or Close Their Indian Bank Accounts and Investments?

Rohan moved to the US for his master’s degree. While studying, he didn’t worry about his Indian bank accounts, as his father managed them. However, after starting work in the US and facing complex tax laws, Rohan became concerned about whether to keep or close his Indian bank accounts. Additionally, his father had made investments in Rohan’s name under his PAN card, adding to his confusion.

Rohan is not alone in facing these questions. Reporting global accounts and investments to tax authorities often creates this kind of uncertainty for tax residents.

(Read: When will the Students Studying abroad become an NRI?)

It’s a big decision, and honestly, there’s no one-size-fits-all answer. It depends on your circumstances, financial goals, future plans, and how connected you feel to India. 

Let’s break it down in a way that’s easy to understand, so you can make an informed choice.

Why You Might Want to Keep Your Indian Bank Accounts and Investments

Staying Connected to Family and Financial Commitments

For many NRIs, India is still home in some way—whether its family ties, plans to return someday, or simply a desire to stay financially connected to the country. Having an Indian bank account can make life a lot easier when you’re sending money back home, supporting family, or even managing property. For instance, if you have aging parents or siblings in India, having a local account ensures you can quickly transfer funds in case of emergencies.

Attractive Investment Opportunities

India offers some pretty attractive investment opportunities, especially in fixed deposits, mutual funds, and real estate. The interest rates on NRI-specific accounts like NRE (Non-Resident External) or FCNR (Foreign Currency Non-Resident) accounts are often higher than what you’d get in many other countries. For example, NRE fixed deposits offer tax-free interest, which is a huge advantage. Additionally, India’s growing economy presents opportunities for long-term capital appreciation in sectors like real estate and equities.

Ease of Managing Property and Other Assets

If you own property or other assets in India, keeping an Indian bank account is almost a necessity. Rent collection, property maintenance, Receiving Inheritance, and paying utility bills become much easier with a local account. Plus, if you plan to sell your property in the future, having an account in India will simplify the process of receiving and managing the proceeds.

Future Plans to Return to India

If you have even the slightest thought of returning to India someday—whether for retirement, family reasons, or career opportunities—keeping your Indian accounts open makes sense. It ensures you have a financial foundation in place when you return, making the transition smoother.

Do remember that you need to convert your Indian savings account to an NRO account if you want to continue after becoming an NRI

Reasons to Consider Closing Your Indian Accounts

Simplifying Your Financial Life

Managing finances across borders can be a hassle. Exchange rate fluctuations, compliance with tax laws in both India and your country of residence, and the paperwork involved can feel overwhelming. If you’re someone who prefers simplicity and doesn’t see yourself returning to India anytime soon, it might make sense to consolidate your finances in your current country of residence. (Read: How to manage 401k Plan, if you are returning to India?)

Currency Risk and Depreciation Concerns

The Indian rupee has historically been subject to depreciation against major global currencies like the US dollar, euro, or pound. If you’re worried about the rupee losing value over time, you might feel more comfortable moving your money to a currency that’s more stable or aligned with your long-term goals.

(Read: Investment Plan during Rupee Depreciation?)

Lack of Emotional or Financial Ties to India

If you’ve fully settled abroad and don’t see yourself returning to India, closing your accounts could be a way to simplify your financial life and avoid unnecessary complications. For example, if you no longer have family in India, don’t own any property, and don’t plan to invest in the country, maintaining an Indian account might not make much sense.

Difficulty in Managing Accounts Remotely

While technology has made it easier to manage accounts remotely, some NRIs still find it challenging to keep track of their Indian finances. Issues like updating KYC (Know Your Customer) documents, dealing with frozen accounts due to inactivity, or navigating customer service can be frustrating. If you’re not actively using your Indian accounts, it might be better to close them.

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The Role of Taxation in Your Decision

Double Taxation and Compliance

As an NRI, you’re required to comply with tax laws in both India and your country of residence. While India has Double Taxation Avoidance Agreements (DTAAs) with many countries, navigating these rules can still be tricky. For example, interest earned on your bank accounts needs to be reported in your country of residence. Similarly, capital gains from selling property or investments in India could have tax implications in both countries.

Tax-Free Benefits of NRE Accounts

One of the biggest advantages of NRE accounts is that the interest earned is tax-free in India. This can be a significant benefit if you’re looking for a safe and tax-efficient way to park your funds. However, you’ll still need to check whether this income is taxable in your country of residence.

Capital Gains Tax on Investments

If you have investments in India, such as stocks, mutual funds, or real estate, you’ll need to consider the tax implications of selling them. For instance, long-term capital gains on equity investments are taxed at 12.5% in India, while short-term gains are taxed at 20%. Real estate sales can attract even higher taxes, depending on the holding period. Understanding these rules is crucial to avoid any surprises.

Emotional and Practical Considerations

Emotional Connection to India

For many NRIs, India is more than just a country—it’s home. If you’re someone who visits frequently, has family here, or plans to retire in India, keeping your accounts open might give you peace of mind. It’s not just about the money—it’s about staying connected to your roots.

Practicality of Managing Ongoing Commitments

If you own property in India or have ongoing financial commitments, such as loans or investments, keeping your accounts active can make managing these obligations much easier. For example, if you have a home loan in India, having an NRE or NRO account allows you to make repayments seamlessly.

Future Uncertainty and Flexibility

Life is unpredictable, and you never know what the future holds. Keeping your Indian accounts open gives you the flexibility to adapt to changing circumstances. For instance, if you decide to return to India or invest in the country later, having an existing financial footprint can save you a lot of time and effort.

Should NRIs keep Indian bank accounts -Making the Right Decision for You

Ultimately, the decision to keep or close your Indian bank accounts and investments is a personal one. It’s about balancing your financial goals, your connection to India, and your desire for simplicity. If you’re unsure, take your time to weigh the pros and cons.

After all, good money management isn’t just about numbers—it’s about making decisions that align with your life and your values. So, whether you decide to keep your Indian accounts or close them, make sure it’s a choice that feels right for you.

If you’d like to discuss your specific situation further, feel free to reach out. Together, we can create a financial plan that works for your unique needs and goals.