Introduction

Many Indian citizens, like myself, have held bank accounts with major global banks such as Bank of America (BoFA) while living abroad during their career growth. After returning to India, managing finances across borders can be a complex and nuanced process. This article aims to simplify this process by providing detailed guidelines on managing earnings between the USA and India, with a special focus on Bank of America accounts.

As an Indian citizen who has recently moved back to India, you might have accumulated earnings in the USA which you wish to transfer back to your INR account. The frequently asked question is whether you can continue depositing your earnings in USD to your BoFA account or if you are restricted to Non-Resident External (NRE) accounts in India. This article will explore these nuances and provide you with practical insights.

Understanding the Liberalised Remittance Scheme

The Liberalised Remittance Scheme (LRS) facilitates the repatriation of foreign currency funds by Indian residents. Under this scheme, Indians residing in India can repatriate a maximum of US$250,000 per financial year to their USA bank accounts. This repatriation is subject to a Withholding Tax (TCS) of 20%, which can be claimed while filing your tax returns.

To claim the TCS, it's important to disclose your foreign accounts and their corresponding incomes in Schedule FSI (Foreign Securities and Investments) each financial year.

Regulatory Restrictions and NRE Accounts

As an Indian citizen residing in India, you cannot directly deposit your INR earnings into a Bank of America account in the USA. Instead, you are restricted to using Non-Resident External (NRE) or Non-Resident Ordinary (NRO) accounts with an Indian bank.

NRE accounts are designed to accept and convert foreign earnings (such as USD) into INR. On the other hand, NRO accounts can accept INR deposits from Indian sources but are typically not suitable for direct foreign currency transactions.

It is important to note that NRE accounts need to be closed immediately upon return to India for settlement. If you are planning to manage your assets cross-border, you might want to consider the periodic repatriation of funds through the LRS scheme as per the guidelines mentioned above.

Currency Conversion and Tax Implications

When converting your INR to USD for investment or other purposes, you should consider the currency risk. To manage this, you can convert your earnings through an Indian bank, which will take care of the currency conversion and any tax implications.

Experts recommend consulting both your BoFA representative in the USA and a local Indian bank to understand the specific rules and procedures. This is crucial for minimizing fees, tax implications, and adhering to regulatory requirements.

Returnee NRI and Managing US Bank Accounts

While you, as a returnee Non-Resident Indian (NRI), can maintain a US bank account and continue to deposit US income therein, you are limited to maintaining a resident bank account in India. NRE accounts, which are typically maintained by non-residents, must be closed immediately upon returning to India.

Note that Indian INR income cannot be directly remitted to the USA, but you can remit up to US$250,000 annually for investment purposes.

Important Considerations

To ensure a smooth transition and compliance with Indian and international financial regulations, it is advisable to:

Consult Your Bank: Understand the specific rules, fees, and tax implications associated with managing your BoFA account. Close NRE Accounts: Ensure that your NRE accounts are closed after returning to India. Prioritize Investments: Take advantage of the LRS to remit funds for financial goals, keeping in mind the exchange rates and currency risks.

Conclusion

In summary, while you cannot directly deposit INR into your BoFA account in the USA, you can manage your US earnings through NRE or NRO accounts. The LRS allows for controlled repatriation of funds for investment. It is crucial to stay informed and adhere to the regulatory requirements to avoid any complications. Best of luck as you navigate your financial journey between India and the USA.