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I am returning to India in next 3 months from USA. I have some savings money in my USA bank account. I have learnt about NRE and NRO account. I have been in USA from past 3 years and unfortunately I have not yet created any NRE or NRO account. I am now planning to transfer all my saving to Indian bank account. I am looking for the best option available for me.

Option 1: Open NRE account : Since I am relocating permanently this might not be good option for me as converting NRE account to regular account needs first conversion of NRE account to Residence Foreign Currency account which can then be converted to regular savings account. Hence I believe there would be two conversions required in short period of 3 months.

Option 2: Create NRO account: There would be taxes on the interest earned of the funds. But I am not sure of this, since I will have been moved to India permanently would I need to still pay taxes on the interest earned while I am in India?

Option 3: I can transfer my funds directly to my account in India but I believe I would have to pay tax on the the funds that I transfer and that would be double taxation. Which I think would be the worst option for me. Please correct me if I am wrong.

Option 4: I can transfer the funds to my direct relatives account. I still believe there would be tax to be paid on the interest earned of the amount.

I think creating only NRO account would be the best option for me as there would be not double taxation and only single conversion of the currency (using any services like money2India or wire transfer) and NRO account can be easily converted to regular savings account. But I am not sure if the interest earned after 3 months (after I have moved to India) would be eligible for tax?

The more I search online more confusing it sounds to me. Can any one please help me what would be the Ideal/best option for me? Please feel free to correct me if any of my assumptions above hold false.

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As an NRI, you can't hold a regular savings account. It should have been converted to NRO.

Option 1: Open NRE account : Since I am relocating permanently this might not be good option for me as converting

This is the best Option as funds into NRE are not taxable in India. The provides a clean paper trail so that if there are any tax queries, you can answer them easily. You can open a Rupee NRE account, move the funds. On return move the funds into Normal Savings account and close the NRE account. This is not much of hassle.

Option 2: Create NRO account: There would be taxes on the interest earned of the funds. But I am not sure of this, since I will have been moved to India permanently would I need to still pay taxes on the interest earned while I am in India?

Any interest in NRO or normal savings account is taxable in India. There is no exemption.

Option 3: I can transfer my funds directly to my account in India but I believe I would have to pay tax on the the funds that I transfer and that would be double taxation. Which I think would be the worst option for me. Please correct me if I am wrong.

This is incorrect. Any earnings outside of India when your status is NRI, is not taxable in India. Opening an NRE account provides proper paper trail of funds. As an NRI one cannot hold normal savings account. This should have been converted into an NRO account. Although there is no penalty prescribed, its violation of FEMA regulation. I also hope you were declaring any income in India, i.e. interest etc on savings and filing returns accordingly.

Option 4: I can transfer the funds to my direct relatives account. I still believe there would be tax to be paid on the interest earned of the amount.

You can transfer it to your parents / siblings / etc. This would come under gift tax purview and would not be taxable. They can then gift this back to you. However such transactions would appear to be evading regulations and may come under scrutiny. Interest on Savings account is taxable.

So best is go with Option 1. No hassle. Else go with Option 3, but ensure that you have all the paperwork kept handy for next 7 years.

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  • Great answer, one question though - option #3 is not a valid option as being an NRI he cannot have a regular savings account in India. So effectively his only choice is to transfer to NRE account. Is this correct?
    – user2696565
    Jul 6, 2019 at 13:56
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    @user2696565 Yes that is correct. Ideally transfer to NRE account.
    – Dheer
    Jul 9, 2019 at 2:51

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