Breaking Down the Rules: Banking Solutions for Indian Students Studying Abroad

Looking to achieve financial independence as an overseas Indian student? Explore the rules on bank accounts and embrace a world of opportunities.

Overseas Banking

Are you an Indian resident studying overseas and wondering about the rules governing bank accounts for your specific situation? This article delves deep into the crucial question of whether Indian students studying overseas should change their Indian savings bank account to a non-resident external (NRE) or non-resident ordinary (NRO) account, and the implications of doing so. Additionally, we will explore the conditions that determine one's residency status for tax purposes. By understanding these key aspects, Indian residents studying overseas can make informed decisions regarding their bank accounts, taxation, and other financial matters.

  • Indian students abroad must notify their banks in India.
  • Two ways to determine tax residency in India.
  • 182-day and 60/365-day rules for tax residency.
  • Residency status affects tax payments and benefits.

Informing the Bank: Extended Overseas Stays

Indian residents planning to live abroad must inform their bank to convert their accounts to foreign currency. This applies to students as well.

Conditions for NRI joint accounts

Following RBI guidelines, banks can add NRIs as joint account holders with residents. NRIs can make domestic payments but not gain personal benefits.

Also ReadSpending on Overseas Education, Treatment or Travel? Check Guidelines

Residency status for tax purposes

There are two ways to determine tax residency in India.

  • 182-day rule: Resident is in India for 182+ days during the financial year.
  • 60/365-day rule: You’re a resident if you’re in India for 60+ days in the financial year and 365+ days in the past 4 years. For Indian citizens or people of Indian origin visiting India, it’s 182 days instead of 60.

The following are considered as deemed residents:

  • Indian citizens leaving for employment or Indian ship crew are considered residents if they meet the 182-day or 60/365-day rule.
  • Indian citizens not liable to tax elsewhere with income over ₹15 lakhs, excluding foreign sources, are deemed residents of India.
  • For Indian citizens or of Indian origin visiting India, if their income exceeds ₹15 lakhs, Excluding foreign sources, the 60-day requirement becomes 120 days. Otherwise, it’s 182 days.

Besides the 182-day and 60/365-day rules, there are two more additional conditions for tax residency in India which are listed below:

  • First condition: You must be a resident in 2 of the past 10 financial years.
  • Second condition: You must have been in India for 729+ days in the past 7 years.

Interpreting the meeting of one or more additional conditions:

  • Meeting both additional conditions makes you a tax resident. 
  • Meeting one additional condition makes you a resident, but not an ordinary resident. 
  • Meeting none makes you an NRI for tax purposes.

Also Read: Applying for a loan to study overseas? Here’s what you need to know:

Indian residents studying overseas should be aware of the different residency statuses for tax purposes in India. There are two main residency statuses: resident and non-resident. Your residency status will affect how much tax you pay in India. It may also affect your eligibility for certain tax benefits. If you are an Indian resident studying overseas, it is highly recommended that you consult with a qualified tax advisor to discuss your residency status and how it may affect your financial situation.

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