The day you become a non-resident, your money starts living under two tax systems at once. That sounds like a problem for a specialist, and mostly it isn’t: this file covers which Indian accounts to hold, how to move money in each direction without overpaying, and the US forms that catch people out. The US-side bank and card setup is in the money file. Start with Section A below: tell us where a given sum of money comes from, and we’ll name the account it belongs in.
Karan’s paperwork, checked again
Karan wrote the first version of this file from his own accounts and filings. Rates, thresholds and form names were checked again in August 2026 against the sources at the bottom.
The expensive mistakes here are all boring ones. A resident savings account you forgot to convert breaks India’s foreign-exchange law (FEMA). A monthly mutual-fund plan (an SIP) that kept running quietly became a US tax problem, taxed at top rates plus interest. And a $150,000 gift from your parents owed no tax at all, yet skipping one form on it can cost $37,500.
WHAT THE BORING MISTAKES COSTAUG 2026
$37,500
top penalty on an unreported $150,000 gift
31.2%
tax withheld on NRO interest without treaty paperwork
$1M
what you can move out of NRO a year, with forms
None of these are exotic. They come from a savings account, a monthly fund plan, and a gift from your parents. Every one of them is avoidable with a form filed on time, and this file walks you through each.
NRE, NRO, and your old savings account
An NRE account holds money you earned abroad. An NRO account holds money earned in India. The two are not interchangeable, and the source of the money decides for you. Pick where a given rupee or dollar comes from, and the box names the account it belongs in.
Your pick changes this box only. Nothing here is saved or sent anywhere.
THE TAX WITHHELD ON NRO INTEREST
India withholds tax on NRO interest at source (called TDS), and the rate is 31.2%, not the 30.9% older guides quote. The India–US tax treaty caps it at 15%, but the cap does not apply automatically. Your bank needs a Tax Residency Certificate from the IRS (Form 6166), plus an e-filed Form 10F, and it applies the lower rate only from then on. Set this up before the interest is credited, not at filing time.
The conversion, in order
Your existing resident account has a one-way door, and the clock on it starts the day your status changes.
01
A resident account converts only to NRO
Never to NRE, whatever a relationship manager tells you. Do it immediately: holding a resident account as an NRI is a FEMA violation, and the account keeps working throughout the conversion.
02
Open a fresh NRE account separately
Do this if you plan to send US income into India. The NRE account keeps that money tax-free in India and free to move back out later. Open it before your first transfer of US income. You cannot convert your way into one.
03
The paperwork is short
A visa copy, your passport, and proof of your overseas address. ICICI, HDFC, SBI and Axis all accept the conversion request, and some offer it fully online.
04
Redirect the standing instructions
Rent collection, dividend payouts and any SIP all point at the NRO account once it is active. This is the step people forget, and it leaves Indian-source income landing in a technically-closed resident account.
What the transfer actually costs
Compare rupees landed, never the stated fee. The numbers below are a snapshot at a mid-market rate near ₹95, and corridor pricing changes without an announcement.
The conventional wisdom says Remitly wins small transfers and Wise wins above $3,000. On this corridor in August 2026 that crossover did not show up, and Remitly landed more rupees at both $1,000 and $5,000. So the advice is the boring one: run both calculators for anything over $2,000 and take that day’s winner.
the 1% remittance tax only hits cash
In force since January 2026, and it applies only to transfers funded with physical cash, money orders or cashier’s cheques. Anything funded from a bank account or a US-issued card (Wise, Remitly, a plain wire) is exempt. If you were going to walk cash into a transfer agent, don’t.
Going the other way
Two routes out of India, and whose money it is decides between them. The Liberalised Remittance Scheme (LRS) is the Reserve Bank’s rule letting each Indian resident send up to $250,000 abroad per financial year, for permitted purposes. Note the word resident. Once you are an NRI, LRS stops being your route. Your channel is the NRO one.
THE TWO ROUTES OUTPER FINANCIAL YEAR
$1M
your money, out of NRO, after tax, with forms
$250k
per resident parent, under LRS
Both caps reset every 1 April with the Indian financial year.
The NRO route is not a simple wire. Under ₹5 lakh total in the financial year, you file Form 15CA Part A yourself. Above that, you need Form 15CB from a Chartered Accountant certifying taxes are settled, then 15CA Part C.
On your parents’ side, TCS (tax collected at source) is what the bank collects from them at the moment of transfer: 20% above ₹10 lakh a year when the money funds your living costs or a startup, and 2% for education and medical. They can claim it back on their Indian return, so it is a cash-flow hit rather than a cost. The credit only arrives when their return is processed.
the forms are renamed from 1 April 2026
15CA becomes Form 145 and 15CB becomes Form 146 under the Income-tax Act, 2025. Thresholds and the CA requirement carry over, and remittances completed before 31 March 2026 stay on the old names. Some purposes are exempt from the forms entirely, so a CA who does NRI work will steer you in a ten-minute call.
Which forms do you owe?
First, the good news: none of these forms create tax. What they carry is penalties for silence, so the job is simply knowing which ones apply to you. Set the three numbers below, and the box names your filing set.
Rough guidance, not tax advice. Thresholds are the 2026 figures for someone living in the US. The year-end and any-time tests for Form 8938 differ, and a CPA who does India–US work will confirm your set in one call.
Nothing you set here is saved or sent anywhere.
The loose ends
Four things you own in India change status the moment you do. None of them need panic, and all of them get more expensive to ignore.
MUTUAL FUNDS
Taxed punitively under US PFIC rules
PFIC is the US tax regime for foreign funds. Once you are a US tax resident, it often taxes Indian mutual funds at top rates plus interest charges on paper gains, with a separate form per fund per year. Most NRIs exit before their first full US tax year, and we would do the same. Talk to a CA who knows PFIC before adding new money.
KYC & DEMAT
One modification covers your folios
Through the KYC registration agency, plus notifying the fund registrars. Your resident demat and trading accounts close and reopen as NRO versions. This is FEMA compliance, not optional housekeeping.
PPF
Disclose, keep contributing, calendar the maturity
Tell your bank or post office of your NRI status promptly, because since October 2024 accounts with undisclosed NRI status can have interest cut to the savings rate or to zero. You can keep contributing to the 15-year maturity on a non-repatriable basis, but the account cannot be extended past it and you cannot open a new one.
FCNR DEPOSITS
Dollars, parked in India
A fixed deposit held in foreign currency, so principal and interest stay in USD and carry zero rupee risk. Roughly 3.5 to 5% on one to two year tenures, with RBL Bank and YES Bank near the top of that range around 4.85% in mid-2026. Exempt in India, still taxable in the US. For dollars you don’t need in the US near-term but want accessible for India-side plans.
the FCNR window closes 30 September
The RBI temporarily lifted the rate ceiling on 3 to 5 year deposits until 30 September 2026, and banks are advertising 6.25 to 6.75% on those tenures. That is well above US savings rates with no rupee risk, though the interest is still US taxable. Rates move, so compare two or three banks the week you invest.
What to do now
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Good to know
01
NRE interest is only tax-free in India
Once you are a US tax resident, interest on NRE, NRO and FCNR accounts all lands in your US return. Plan your US taxes on that basis from year one.
02
Both parents count as one
The $100,000 Form 3520 threshold adds up gifts from a foreign person and everyone related to them. Two parents sending $60,000 each crosses it.
03
The deadline matches, the envelope does not
Form 3520 cannot be e-filed with your return even though its deadline is the same. It goes in its own envelope to Ogden, Utah.
04
Gift-splitting doubles the room
Married founders can jointly give $38,000 per recipient per year by electing to gift-split on Form 709, which is useful when supporting both parents.