What are the FEMA Rules for NRI Accounts?

For OCI holders, there's another important distinction.

Being an OCI cardholder doesn't by itself make someone an NRI for every purpose. RBI's FAQ describes an OCI cardholder as a PIO who is also a person resident outside India for the account rules.

So citizenship and FEMA residential status shouldn't be treated as the same thing.

As for NRE and FCNR accounts, RBI says NRE accounts can be maintained by eligible NRIs/PIOs, while FCNR(B) accounts are foreign-currency term deposits.

If someone returns to India and becomes a resident again, the account treatment changes. RBI says NRE accounts should be designated as resident accounts, or funds may be transferred to an eligible RFC account at the account holder's option. FCNR(B) deposits may continue until maturity at the contracted rate, subject to the applicable rules. NRO accounts can be redesignated as resident accounts when the person returns to India with an intention to stay for an uncertain period.

So I would review the account status whenever your FEMA residential status changes.

The repatriation part confused me too.

NRO funds aren't simply "non-repatriable under every circumstance." RBI's current FAQ says an NRO account is generally not repatriable except for current income and remittances by NRIs/PIOs up to USD 1 million per financial year, subject to the applicable FEMA provisions.

So the source of the money matters.

For example, rental income, pension, dividends, or other legitimate Indian income can be credited to an NRO account. RBI's FAQ lists legitimate dues in India and certain permitted credits among the transactions for NRO accounts.

I wouldn't interpret the USD 1 million facility as meaning you can automatically transfer any amount without documentation. Your bank can ask for supporting documents and evidence that the transaction complies with FEMA and applicable tax requirements.

For larger transfers, I would ask the authorised dealer bank exactly what documents they need before initiating the remittance.

The first thing I would look at is your residential status under FEMA, rather than simply whether you're an NRI for tax purposes.

Once you become a person resident outside India, the treatment of your existing Indian resident bank account changes. RBI's current FAQ says that when a resident Indian becomes a person resident outside India, the existing resident account should be designated as an NRO account.

For my situation, the bank converted my old resident savings account to an NRO account after I informed them of my move abroad.

I then opened a separate NRE account for funds coming from overseas.

The broad distinction that helped me was:

NRE: Rupee account for eligible non-residents, with repatriable funds and tax treatment that differs from NRO.

NRO: Rupee account for managing legitimate Indian income and other permitted rupee transactions. Repatriation is subject to FEMA conditions.

FCNR(B): Foreign-currency term deposit for eligible non-residents.

RBI's FAQ confirms these are the main account types available to non-residents in India.

The bank also asked me to update my residential status and KYC details.

Another point that often gets overlooked is what happens when your residency status changes again.

For example, if you return to India permanently and become resident under FEMA, your NRI accounts can't simply be treated exactly as before. RBI rules have provisions for redesignating accounts when a person's residential status changes.

FCNR(B) deposits have specific treatment when the account holder becomes resident. RBI guidance says the deposit may continue until maturity under the contracted terms if the account holder chooses, but for other purposes it is treated as a resident deposit from the date the person returns to India, with the applicable conversion options at maturity.

So I would keep the bank informed whenever your residential status changes rather than waiting until there's a transaction problem.

And yes, OCI status doesn't by itself mean you are automatically an NRI for every purpose. FEMA uses its own definition of "person resident in India" and related categories. Your actual residential status matters.

I had the same confusion when I moved abroad.

My understanding is:

NRE: Rupee account generally used for eligible funds coming from outside India. It has repatriation benefits.

NRO: Rupee account used for managing income and transactions in India. This is the account I use for things such as Indian rental income.

FCNR(B): A foreign-currency term-deposit account, which can be useful if you don't want the deposit itself exposed to INR currency conversion while it's held in the account.

The RBI's FAQ confirms that these are the major account categories available to non-residents and sets out their respective eligibility and features.

One thing I wouldn't do is simply choose an account based on which one has the highest interest rate. Repatriation, taxation, currency exposure and how the money will be used in India all matter.

Also, if you have an existing resident account, don't assume you can keep operating it indefinitely after becoming non-resident. I'd contact the bank and ask them to review the account under the current FEMA requirements.