What FEMA rules govern NRI bank accounts such as NRE and NRO accounts?

Question

I have recently moved abroad for work and want to know what kind of bank account I should maintain in India and what rules apply to repatriating the funds. I have been reading conflicting things online and I would like to understand what Indian law actually says about this, which Act and Section applies, what the realistic timelines and costs are, and what I should be doing right now to protect my position. If the matter can be resolved without litigation I would prefer that route, but I want to know what my rights are before I agree to anything or sign any document.

MyVakeel Legal Desk · Accepted Answer

What FEMA rules govern NRI bank accounts such as NRE and NRO accounts? is governed in India primarily by Foreign Exchange Management Act 1999, Section 6, FEMA (Deposit) Regulations 2016 and Income Tax Act 1961, Section 10(4). The short answer is set out below, followed by the practical steps most people in this situation need to take. Read it alongside the specific provisions named, because the exact relief available to you turns on the facts you can prove on paper.

Section 6 of the Foreign Exchange Management Act 1999 empowers the RBI to regulate and prescribe the manner in which persons resident outside India can hold accounts in India, and this power is exercised through the FEMA (Deposit) Regulations 2016.

A Non-Resident External (NRE) account holds foreign earnings converted to rupees and is fully repatriable, including both principal and interest, while a Non-Resident Ordinary (NRO) account is meant for income earned in India, such as rent or dividends, and repatriation from it is subject to specified limits and tax clearance.

Interest earned on an NRE account is exempt from Indian income tax under Section 10(4) of the Income Tax Act 1961 as long as the account holder retains non-resident status, whereas NRO account interest is fully taxable in India.

On becoming a non-resident, a person is required under FEMA to re-designate their existing resident savings account as an NRO account, and continuing to operate a regular resident account after becoming an NRI is a violation of FEMA regulations.

Repatriation of funds from an NRO account is capped at USD 1 million per financial year, subject to submission of Form 15CA and 15CB confirming tax compliance, whereas NRE account funds can be freely repatriated without such a cap.

What to do next: 1) Inform your bank of your change in residential status immediately upon becoming an NRI; 2) Convert your existing resident account into an NRO account and open an NRE account for foreign remittances if needed; 3) Maintain records of income earned in India for tax clearance before repatriating funds from the NRO account; 4) File Form 15CA and 15CB where required before repatriating NRO funds above the prescribed threshold.

If the other side has already issued a notice, filed a case or set a deadline, treat the matter as time-sensitive — most remedies under Foreign Exchange Management Act 1999, Section 6 carry limitation periods, and a delay you cannot explain weakens an otherwise strong case. You can post the details on the MyVakeel forum for a practising advocate to review, or book a paid consultation with a Bar Council verified lawyer in this practice area.