Q.1079 Penalty for holding

domestic bank account after

becoming NRI

Question: Sirs, is it necessary to convert Resident account to NRO ACCOUUNT for an NRI who is still india citizen. what is the penality for not doing so. THANKS Answer: Actually no time limit or specific penalty is spelled out for not converting domestic bank accounts to non-resident bank accounts. If anyone feels that this makes no difference whether they follow RBI directions to convert domestic bank accounts to non- resident accounts when their status changes to being non-resident [NRI] Read on . . . Section 13 of The Foreign Exchange Management Act, 1999 deals with penalties and here is an excerpt from Section 13: 13. Penalties.— (1) If any person contravenes any provision of this Act, or contravenes any rule, regulation, notification, direction or order issued in exercise of the powers under this Act, or contravenes any condition subject to which an authorisation is issued by the Reserve Bank, he shall, upon adjudication, be liable to a penalty up to thrice the sum involved in such contravention where such amount is quantifiable, or up to two lakh rupees where the amount is not quantifiable, and where such contravention is a continuing one, further penalty which may extend to five thousand rupees for every day after the first day during which the contravention continues. —(1) If any person contravenes any provision of this Act, or contravenes any rule, regulation, notification, direction or order issued in exercise of the powers under this Act, or contravenes any condition subject to which an authorisation is issued by the Reserve Bank, he shall, upon adjudication, be liable to a penalty up to thrice the sum involved in such contravention where such amount is quantifiable, or up to two lakh rupees where the amount is not quantifiable, and where such contravention is a continuing one, further penalty which may extend to five thousand rupees for every day after the first day during which the contravention continues." (2) Any Adjudicating Authority adjudging any contravention under sub-section (1), may, if he thinks fit in addition to any penalty which he may impose for such contravention direct that any currency, security or any other money or property in respect of which the contravention has taken place shall be confiscated to the Central Government and further direct that the foreign exchange holdings, if any, of the persons committing the contraventions or any part thereof, shall be brought back into India or shall be retained outside India in accordance with the directions made in this behalf. Explanation.—For the purposes of this sub-section, “property” in respect of which contravention has taken place, shall include— (a) deposits in a bank, where the said property is converted into such deposits; (b) Indian currency, where the said property is converted into that currency; and (c) any other property which has resulted out of the conversion of that property. Hopefully this will answer your question. Anyone holding domestic bank accounts in India, once they become NRI, should convert their accounts to non-resident bank accounts as soon as possible.