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My brother is a NRI for the past 18 years. But he has a domestic Savings Bank account that was opened when he was in India.

He has been transferring funds to this SB account from overseas, for the past several years. He has Fixed Deposits in Rupees, in the same bank.

Recently, he got a notice from IT dept about FD. Now, how can he convert his SB (and FD) accounts to NRE account into the same or any other bank, without getting taxed?

He is not filing IT returns since he is a NRI. Thanks in advance for your advise/answers.

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    Does the brother have a PAN card? Has the bank been subjecting the interest earnings to TDS? Where is the brother residing? and since some countries tax the global income of their residents, has the brother been paying taxes on that interest earned in India to the country of his residence? s the brother a US resident? And if so, has he been declaring the existence of these non-US accounts to the IRS and the US Treasury as required by law? If not, he is in worse tax trouble in the US than in any entanglements with the Indian Income Tax Office. – Dilip Sarwate Dec 23 '16 at 7:56
  • Yes. He has a PAN Card. The bank is taking Form 15G and not deducting TDS. He is residing in Japan and pays taxes for his income there, but not on his interest income from India. Can't a NRI have a domestic resident account (SB account) as mentioned by one of the members of this group? Regards. – S.Vas Dec 24 '16 at 9:54
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Please consult a professional CA in India as well as CPA in country of his current residence. It seems there are quite a few irregularities.

But he has a domestic Savings Bank account that was opened when he was in India.

As a NRI, one cannot hold Domestic Savings Account, this is violation of Foreign Exchange Management Act [FEMA]. Please have this converted to NRO [Non-Resident Ordinary] Account ASAP.

He has Fixed Deposits in Rupees, in the same bank.

If there were normal FD's; these are not allowed. These need to NRO-FD's.

Recently, he got a notice from IT dept about FD. Now, how can he convert his SB (and FD) accounts to NRE account into the same or any other bank, without getting taxed?

Any interest on NRO Account is taxable in India. Tax has to be paid. Similarly this should be reported in the country of residence [for most countries. Some relief on tax can be claimed under DTAA [Dual Tax Avoidance Agreement] if there is such arrangement between India and said country

Funds in Savings / NRO account cannot be transferred to NRE Account. These can be repatriated to US under the Liberalized Remittance Scheme upto 1 million a year. There are some paperwork Form 15CA/CB required. A CA certificate is required. Read more at Liberalized Remittance Scheme and here.

Related questions:
Transfer Money from My Account in India to my account in the USA
What is the maximum amount of money that can be transferred from India to USA?

  • Thank you for your detailed and itemized answer. But there is an RBI circular (which was mentioned by Mr.Ramesh) that allows Domestic Resident account for NRIs? Is it not right? – S.Vas Dec 24 '16 at 9:52
  • @S.Vas do you have a link? There is nothing like this to my knowledge – Dheer Dec 24 '16 at 11:02
  • I don't have the link. Here are the details of the circular. RBI/2013-2014/437 A.P. (DIR Series) Circular No. 87 January 9, 2014. – S.Vas Dec 27 '16 at 9:58
  • @S.Vas The link is rbi.org.in/scripts/BS_CircularIndexDisplay.aspx?Id=8681 . This is totally irrelevant for you case. The case mentioned is if you [Resident Indian] have a Regular savings account, your brother who is NRI can be a joint account holder. However the account belongs to you and will follow all taxation as per Indian rule. – Dheer Dec 27 '16 at 11:09

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