Many Indians are moving abroad for better work opportunities and a change in lifestyle. In recent times Indians have moved to or settled in countries like UAE, Canada, USA, UK, and France among others. Moving to a new country has its set of challenges and all loose ends must be tied-up before you move abroad. Follow this checklist to tie-up financial loose ends and join the growing list of NRIs.
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The first step you do before moving abroad is to get your bank accounts in order. When you become an NRI, you cannot maintain resident bank accounts. Get them redesigned as NRO accounts. (Non-Resident Ordinary Accounts). If you have many resident bank accounts, consolidate them. It’s not easy to convert many resident bank accounts into NRO accounts.
You need only one bank account to receive any income like rent and dividends you get in India. Decide on a particular account (The account you would like to hold), fill it up and submit the conversion form. Submit a fresh account opening form, copies of the passport, valid visa and a work permit.
If this bank account is a zero balance account, just deposit a minimum balance as per bank rules. Banks have additional charges for conversion. After your bank account has been reassigned, the interest earned would be repatriable; after applicable taxes are deducted. Close any bank accounts which are not in use, and keep only one bank locker to store documents and valuables.
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What if you had invested in equity mutual funds or stocks before leaving the country? Well, your Demat account would have to be redesigned into an NRO or NRE account.
With an NRE account, you can deposit money in any foreign currency like Dollar, Euro or Sterling Pound and withdraw in Indian Rupees. This is an Indian Rupee denominated account which is freely repatriable. Remittances from NRO accounts are allowed based on limits prescribed by the RBI. You can remit a maximum of $1 Million in a single financial year. You would require a certificate from a chartered accountant to accompany these remittances.
If you have made any fresh investments in the country of residence (This is the place outside India you reside), you can send the earnings to India through the NRE account. If you have made investments in India through stocks and equities, all earnings would be routed through the NRO accounts. You can consider opening and setting up a PIS (Portfolio Investment Scheme Account), to enjoy exposure to equities even after becoming an NRI.
PIS allows NRIs to buy and sell shares and convertible debentures of any Indian Company listed on a recognizable stock exchange like BSE and NSE. You just route the purchase/sale through NRI savings accounts with designated bank branches.
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What to do if you have a mutual fund portfolio? You have to offer fresh KYC details to show your new residential status. Convert your mutual fund folio to non-resident status and get the NRO bank account linked to the mutual fund folio to avoid mismatches. Take professional help as you struggle to manage the portfolio from a foreign country. Do note that some AMCs won’t allow NRIs from the US and Canada to invest in mutual funds because of compliance issues.
After you change the status to NRI, you won’t be able to open a new PPF account. You can’t make fresh deposits in the National Savings Certificate or NSC. If you already have PPF and NSC accounts, hold them till maturity. You keep earning interest. It’s wise to keep the PPF and NSC active till maturity and enjoy interest unless you need the money.
Take a look at all the insurance plans you hold. The car insurance or two-wheeler insurance plan is of no use, so get rid of them. It’s wise to keep term life plans active if you have dependents in India. Set up electronic instructions to make premium payments in time.
If your new employer abroad is offering health cover, get rid of any health insurance plan in India. However, there are some exceptions. Don’t give up health cover if you feel there’s a need to travel to India for medical treatment. Pre-existing diseases have waiting periods of 2-4 years. So retaining the existing health insurance plans is a good idea. Health Insurance Plans cannot be revived once they lapse. Make sure to pay health insurance premiums on time.
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