Moving to UAE is a big step for many to further their careers and professional prospects, but managing your finances while residing overseas as a non-resident Indian (NRI) can seem challenging. One common question that many people face is:

What to do with my savings account?

Well, you need to re-assign it as NRO (Non-Resident Ordinary), and if required, open new NRO or NRE (Non-Resident External) accounts. Let's explore requisite tips, suggestions, and how-tos for enhancing the banking and financial services of NRIs in the UAE.

Convert your resident savings account to a non-resident account

Non-resident Indians (NRIs) need to either close all of their resident savings and other types of bank accounts or transform them into NRO accounts. This is a regulatory requirement.

You must maintain an NRO account if you require it to carry out monetary transactions or have income in India. Here are a few quick steps to convert your resident savings account to NRO:

  1. Visit the branch closest to you and provide your application along with the necessary paperwork. Many Indian banks have branches in the UAE, too.
  2. Submit your request through the mobile banking app or online banking of your bank.
  3. Complete a Re-KYC (Know Your Customer) procedure and submit appropriate proof (address proof, identity proof, photo) in addition to filling out the necessary forms.

Step-by-step process to open NR accounts in UAE

Step 1: Select the appropriate bank

All big Indian banks provide NRI account services. Examine various banks, considering account kinds, minimum balance specifications, services provided, and ease of use.

Step 2: Ascertain the type of account

Two kinds of non-resident savings accounts are available to NRIs: NRE (Non-Resident External) and NRO (Non-Resident Ordinary). Though these are both Indian Rupee denominated accounts, they have significant differences in their tax treatment and ease of repatriation of money back to the UAE (or other foreign country of residence). Based on the following criteria, select the type of account that best suits your savings goals.

NRE Account (Non-Resident External)
NRO Account (Non-Resident Ordinary)
Money can be repatriated freely back to UAE
The repatriation process involves a lot of documentation, tax repercussions, limits on the amount being repatriated, and may require RBI approval of the purpose of repatriation, as per foreign exchange regulations
Transfer overseas earnings to invest in Rupees in Indian financial products (NRE Fixed Deposits, Mutual Funds, stocks)
Keep India-based earnings in India
Savings and FD interest earned in an NRE account is tax-free in India
Savings and FD interest earned in an NRO account is taxable as per Indian tax laws
NRE accounts are susceptible to currency conversion loss (the value of the Indian Rupee may reduce over time relative to the value of the UAE Dirham)
No similar currency risks are associated with NRO accounts (income earned in India continues to be held in Indian Rupees)

Step 3: Compile the necessary documents

Assemble the required paperwork, which usually consists of:

  1. Valid passport bearing a visa to reside in the UAE
  2. Evidence of non-resident Indian status (usually a valid residence permit or tax ID issued by the foreign country, including the Emirates ID for UAE)
  3. Passport-sized pictures
  4. Utility bills, rental agreements, and other documents attesting to your UAE address
  5. Identity verification (such as additional government issued identity documents such as Indian PAN card, Indian Aadhaar card, Indian/UAE Driving License, Emirates ID)

Step 4: Visit the bank

To begin the account opening procedure, visit the bank branch of your choice. You can even contact your bank in India before moving to the UAE or follow the requisite process during your return visit to India. The bank personnel will walk you through the necessary steps.

Step 5: Fill out the application

Complete the application for an NRI account that the bank has provided. Make sure that all of the details are up-to-date and precise.

Step 6: Send in your paperwork for KYC

Send in the completed application form along with the documents. The bank will carry out a Know Your Customer (KYC) verification procedure to meet regulatory standards.

Step 7: Activate your account

Upon confirmation, the bank will open your NRI account for transactions. Your debit card and account information will be sent to you along with additional pertinent data. You may typically request the account opening kit to be delivered to either of your UAE or Indian address.

Several private and PSU Indian banks provide a range of financial and banking services to Indian nationals living in Dubai and United Arab Emirates. Some prominent ones include:

  1. Kotak Mahindra Bank
  2. ICICI Bank
  3. State Bank of India
  4. Bank of Baroda
  5. HDFC Bank

How to register as an NRI with the Indian Income Tax department?

  1. ​You must first confirm that you qualify as an NRI as per the guidelines outlined in the Income Tax Act.
  2. If you do not already possess a Permanent Account Number (PAN), apply for one. Form 49AA can be completed online or at a PAN service center.
  3. If you possess a PAN card, you can update it to NRI status by filling in an online form on the IT department website. You must present proof of your NRI status, such as a passport, visa, and overseas address.
  4. Change your residential status to "Non-Resident" on the portal and pay the mentioned fee.
  5. Once your registration is processed, you can file your income tax returns as an NRI using Form ITR-2 or ITR-3, depending on your income sources.

NRE vs. NRO accounts

The main distinctions between Non-Resident External (NRE) and Non-Resident Ordinary (NRO) accounts are:

1. Objective

You need to open a non-resident external (NRE) account to convert your earnings to Indian Rupees while maintaining them outside India. This allows you to invest your UAE income in various financial products in India such as NRE Fixed Deposits, Mutual Funds and stocks.

An NRI can manage their income in Indian rupees while in the country by using an NRO account as a savings account. This may encompass dividend payments, rental earnings, and pensions. You can use this NRO account to manage existing investments in India, as well as further invest your Indian income.

2. Returnability to your foreign account (Repatriability)

Any money deposited into an NRE account, including any interest accrued, is freely repatriable outside India, without any restrictions or approvals.

There are, however, repatriation limits on NRO accounts. After covering all relevant taxes, you can transfer up to USD 1 million outside India from an NRO account in a given financial year (April 1 - March 31).

3. Risk of exchange rates

Exchange rate risks, such as alterations and conversion gains/losses, can impact an NRE account. However, daily changes in exchange rates are less likely to impact an NRO account, but it is not continually risk-free because foreign income could also be passed on to it.

4. Tax guidelines

All savings and FD interest income accrued in an NRE account is tax-free in India. On the other hand, normal Indian domestic taxation rules apply to savings and FD interest earned on NRO accounts (i.e. taxation as per your income slab), including any applicable Tax Deducted at Source (TDS).

Summing up

The FEMA (Foreign Exchange Management Act) laws of RBI restrict any individual residing outside India to use resident savings or current accounts. Hence, if you are moving to the UAE, you need to convert your savings account to an NRO account, and open additional NRO/NRE accounts as per your requirements.

For a hassle-free and legally compliant conversion from a savings account to an NR account in the UAE, it is best to speak with your bank and get advice from a financial advisor.