You took a job abroad, or moved for a business, or went with your family. The flat is rented out or locked. Your Indian savings account is where it always was. Salary, rent or dividends may still land in it. The debit card still works. Nobody at the bank has said a word.

Then someone tells you the account should have changed. Maybe a friend, maybe a tax portal message, maybe a bank KYC form that asks for "residential status". You wonder whether you have broken a rule, and what to do about it.

This is common, and it is fixable. This article explains the two tests of "resident", why the account type matters, what the penalty section says, and the steps to take. It covers the Act and the main Deposit Regulations. It does not cover the detailed conditions of the NRO scheme in the Regulations' schedules, or the RBI's directions to banks on re-designating an existing account. Ask your bank for the current version of those before you act.

## Two different tests of "resident"

The word "resident" has two separate meanings here. Mixing them up is the most common mistake.

**Foreign exchange law (FEMA).** The Foreign Exchange Management Act, 1999 defines "person resident in India" in section 2(v). A person residing in India for more than one hundred and eighty-two days during the course of the preceding financial year is resident. But the definition does not include "a person who has gone out of India or who stays outside India" for or on taking up employment outside India, for carrying on a business or vocation outside India, or "for any other purpose, in such circumstances as would indicate his intention to stay outside India for an uncertain period" (section 2(v)(i)(A), Foreign Exchange Management Act, 1999).

Read that carefully. The test looks at purpose and intention, not only at a day count. Someone who leaves for a job abroad falls outside the "resident" definition because of the reason for leaving. A "person resident outside India" is simply a person who is not resident in India (section 2(w), Foreign Exchange Management Act, 1999).

**Income tax law.** Tax residence is decided year by year, mainly by a day count. For tax year 2026-27 onward, the Income-tax Act, 2025 makes an individual resident in a tax year if he is in India for a total of 182 days or more in that year, or for 60 days or more in the year and 365 days or more cumulatively in the four preceding years (section 6(2), Income-tax Act, 2025).

There are carve-outs:

- For a citizen of India who leaves India in the tax year for the purposes of employment outside India, the second limb (60 days plus 365 days) does not apply (section 6(3), Income-tax Act, 2025).
- For a citizen of India or a person of Indian origin who is outside India and comes on a visit, the second limb does not apply, unless total income other than foreign-source income is above ₹15 lakh. In that case the second limb applies with 120 days in place of 60 (section 6(4) and (5), Income-tax Act, 2025).

For earlier years, up to assessment year 2026-27, section 6 of the Income-tax Act, 1961 applies. Check the year you are asking about.

**The two tests can give different answers.** You can be non-resident under FEMA from the day you take up a job abroad, while still being resident for income tax for that year because you spent 182 days or more in India. Or the reverse. Your FEMA status does not decide your tax status, and your tax status does not decide your FEMA status.

## Why the account type matters

FEMA and the Deposit Regulations deal with deposits between people resident in India and people resident outside India. Three provisions explain why the type of account matters after you move.

First, the Regulations say that, save as otherwise provided in the Act, the Regulations or the rules, directions and orders under the Act, no person resident in India may accept any deposit from, or make any deposit with, a person resident outside India. The Reserve Bank may allow it on application if it is satisfied that this is necessary (regulation 3, Foreign Exchange Management (Deposit) Regulations, 2016). "Deposit" includes a deposit of money with a bank (regulation 2(iv), same Regulations).

Is a bank a "person resident in India"? Yes. A bank incorporated in India is "any person or body corporate registered or incorporated in India" (section 2(v)(ii), Foreign Exchange Management Act, 1999). The Indian branch of a foreign bank is "an office, branch or agency in India owned or controlled by a person resident outside India" (section 2(v)(iii), same Act). Either way, the bank holding your account is on the resident side of that line.

Second, the Regulations then provide the route for people in your position. An authorised dealer in India may accept deposits under the Non-Resident (Ordinary) Account Scheme, the NRO account, "from any person resident outside India" (regulation 5(1)(iii), Foreign Exchange Management (Deposit) Regulations, 2016). The same regulation lets the dealer take NRE and FCNR(B) deposits from a "non-resident Indian", defined as "a person resident outside India who is a citizen of India" (regulation 2(vi) and regulation 5(1)(i) and (ii), same Regulations).

Third, the Regulations call the NRO account a "Non-Resident Ordinary account" (regulation 2(viii)). The point of the scheme is to give non-residents a defined way to hold rupee money in India.

So the reading in this article is: once you are a person resident outside India, the Regulations point you to NRO, NRE or FCNR(B) accounts. A person resident outside India who is also a foreign citizen is not eligible for NRE or FCNR(B), but can hold NRO. The text we cite does not say what happens to an existing resident account on its own, which is why the bank's current process matters.

## The penalty provision, in plain words

Section 13(1) of the Foreign Exchange Management Act, 1999 says that a person who contravenes any provision of the Act, or any rule, regulation, notification, direction or order issued under it, is liable, upon adjudication, to a penalty up to thrice the sum involved where the amount is quantifiable, or up to ₹2 lakh where it is not quantifiable. Where the contravention continues, a further penalty up to ₹5,000 for every day after the first day can be added (section 13(1), Foreign Exchange Management Act, 1999).

Two points keep this in proportion.

- It is a ceiling set by the Act, decided only after adjudication. It is not a standard charge for a resident account that was not changed.
- Whether a particular mismatch is a contravention at all, and how it is resolved, depends on the facts and on the text of the schedules and directions, which this article does not reproduce. Do not assume the worst, and do not assume nothing is wrong. The sensible next step is to correct the position now and keep a record of when you did.

## Step by step: what you can do today

1. **Fix your facts.** Write down the date you left, the purpose (job, business, other), whether you intend to stay abroad for an uncertain period, and your days in India in each recent year. Passport stamps and employer letters are your proof.
2. **Decide your FEMA status.** Apply the section 2(v) wording above. If you went abroad for employment, for business, or for any purpose indicating an uncertain stay, you are likely to be a person resident outside India from the point you left. The wording turns on intention, which is a question of fact. If you are unsure, take advice.
3. **Check your tax status separately.** Count your days under section 6 of the Income-tax Act, 2025 (tax year 2026-27 onward) or section 6 of the Income-tax Act, 1961 (earlier years). The answer decides how your Indian income is taxed and which return you file. It is a separate question from the bank account.
4. **Ask the bank for its process.** Write to your branch, say you are now a person resident outside India, and ask what it needs to convert the account to an NRO account. Ask which RBI direction it is applying. The bank will tell you the documents it needs.
5. **Keep a paper trail.** Save the application, the bank's acknowledgement and the account's new status. If the account was used after you left, note the dates and what moved through it.
6. **Match each kind of money to the right account.** NRE and FCNR(B) are for a non-resident Indian; NRO is open to any person resident outside India. Which account suits which money, and what moves between them, depends on the schedules to the Regulations, which this article does not cover. Ask your bank or CA before moving funds.
7. **Tell your CA.** A change of status may affect tax deducted at source on your interest and other Indian income, what you declare in your return, and any foreign asset schedule.

## What not to do

- **Do not keep operating the account as resident and hope.** If you are a person resident outside India, a resident savings account is a mismatch worth correcting.
- **Do not backdate or adjust the date of leaving to look tidier.** Residence is a question of fact, and your employer records, visa and passport will show it.
- **Do not open a second account and move money across without telling the bank.** Transfers between your own accounts leave a record, and an unexplained pattern is harder to answer than a plain correction.
- **Do not treat the tax and FEMA answers as the same.** A day count that makes you resident for tax does not undo your FEMA status, and the reverse.
- **Do not rely on a forum quote.** The rules change. The Deposit Regulations have been amended several times, most recently in the version amended up to 29 June 2026 (Foreign Exchange Management (Deposit) Regulations, 2016).

## What to do now

- **Next step:** Write to your bank, state your date of leaving and your purpose abroad, and ask for the process to convert your savings account to an NRO account (regulation 5(1)(iii), Foreign Exchange Management (Deposit) Regulations, 2016).
- **Decide your status:** Work out your FEMA status under section 2(v) and your tax status under section 6 of the relevant Income-tax Act. They are separate answers (section 2(v), Foreign Exchange Management Act, 1999; section 6(2), Income-tax Act, 2025).
- **Deadline:** None of the provisions cited here sets a number of days for converting the account, and this article does not state one. Check the current RBI direction and your bank's timeline, and act sooner rather than later.
- **Consequence if left:** If a continuing contravention is found, the Act allows a penalty up to thrice the sum involved, or up to ₹2 lakh where the sum cannot be quantified, plus up to ₹5,000 for each day after the first, after adjudication (section 13(1), Foreign Exchange Management Act, 1999).

Have a CA review your facts before you act or file.

## Frequently asked questions

**Does a savings account become an NRO account automatically when I leave India?**
Nothing in the Act or the Regulations cited here says it converts by itself. The Regulations allow an authorised dealer to accept NRO deposits from a person resident outside India (regulation 5(1)(iii), Foreign Exchange Management (Deposit) Regulations, 2016). In practice the holder tells the bank and the bank re-designates the account. Ask your bank for its current process.

**I went abroad for a job but spent 200 days in India last year. Which status am I?**
They can differ. Under FEMA, section 2(v)(i)(A) turns on going out of India for employment or another purpose indicating a stay abroad for an uncertain period. Under tax law, for tax year 2026-27 onward, 182 days or more in India makes an individual resident for that year (section 6(2)(a), Income-tax Act, 2025); earlier years fall under the Income-tax Act, 1961. Take advice on both questions using your actual dates.

**I am a foreign citizen of Indian origin. Can I hold an NRO account?**
The NRO scheme is open to "any person resident outside India" (regulation 5(1)(iii), Foreign Exchange Management (Deposit) Regulations, 2016). That is wider than the NRE and FCNR(B) schemes, which are for a non-resident Indian, defined as a person resident outside India who is a citizen of India (regulation 2(vi), same Regulations).

**Will I pay more tax once the account is NRO?**
The account type and your tax residence are different things. Tax on your Indian income depends on your residential status under section 6 of the relevant Income-tax Act and on the nature of the income. This article does not cover withholding rates. Ask your CA what applies to your interest.

**I only came to know years later. Is it too late?**
Correcting it now is better than leaving it. This article does not state any limitation period. What happens next depends on the facts, the amounts and the text of the directions, so have the history reviewed before you write to anyone.

**Can I just close the account and open a fresh NRO account?**
You can ask your bank. Before you do, check standing instructions, joint holders and pending credits so nothing is missed.

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