If your’e planning to migrate abroad for a few years because of a job or some other reason then you need to buckle up before you embark on your journey. Your status is going to change to a Non-Resident Indian and it is going to affect your bank, investment and tax payment rules. We are listing the things you need to do!
BANKING
Changing your bank account is a sin qua non. This is because once your’e an NRI, you cannot hold a regular savings bank account in India. An NRI needs to have a Non-Resident External ( NRE) account. Credits to this account can be through remittances from overseas or foreign currency deposits.
Your existing indian accounts will be converted to non-resident ordinary (NRO) accounts, in which you can deposit your earnings in India, such as rental income, pension, etc. You can request the bank to retain the same account number. This saves one the hassle of notifying various agencies about the change.
Generally, for most of the banks, the minimum monthly average balance (MAB) required to be maintained is INR 10000 at an account level or INR 25,000 at Customer ID level. Banks go through a documentation process for opening an NRO account and the information can be availed from the respective bank accounts online site.
You can continue to service a home loan. However, you may need to give fresh post-dated cheques or if the EMI goes through ECS, you will have to route it through your NRO account. It’s helpful to register for receiving e-alerts and loan account statements through net banking. This will allow you to know the principal and the interest portion paid when you file your tax returns abroad.
INVESTMENT
For those who want to continue to trade in India require to open a PINS account with a depository participant (DP). However, one will not be able to invest in every instrument like Public Provident Fund, small savings or certain shares (which are listed by the RBI).
When the status is changed to an NRI with the DP (share broker), it is important for you to differentiate between the shares that can be and cannot be repatriated. For this, you will need permission from the depository (NDSL/CDSL) and separate accounts. The non-repatriable securities will be linked to the NRO bank account and you’ll be able to withdraw sum upto a certain limit.
FREEZING DEMAT ACCOUNT
If you’re not going to use your DEMAT account abroad, you may freeze it. It will continue to receive credits like bonus shares and dividends but transactions will be blocked until written permission is obtained. If you do not want to freeze the entire account, you can do so for a select number of stocks.
KYC FORM
In the case of mutual fund investments, you will have to fill up a know your customer (KYC) form, mentioning the change in your residency status as well as the bank account number. This is done so that the SIP debits take place from your NRO account. If you do not inform the mutual fund house about this, you may suffer loss as SIPs for NRIs cannot be debited from resident savings bank accounts.
INSURANCE
If you have a home back in India, you’d require a home insurance policy that cares for your place in your absence. Home insurances need to be renewed annually and awareness is required. Policies can be taken even if the house in on rent.
In the case of life covers, most insurers do not offer term plans to NRIs, so you could take an endowment plan or a Ulip. Mediclaim too is an important insurance need.
POWER OF ATTORNEY
Power of attorney is tequired to be provided to the persons you want to look after your property. They can be friends, family member, financial advisor or lawyer.
A limited power of attorney for specific transactions should be registered. Like if you want to rent out a flat, you can nominate someone to operate the bank account for handling the rental income.
Remember that a power of attorney can only be used to handle existing accounts or investments and not to open new ones.
TAXATION
Before you leave, a ‘no tax is pending’ certificate needs to be obtained from a chartered accountant. Makesure you have a PAN (Permanent Account Number) because you will have to pay tax when you redeem your investments.
Registering for the annual tax statement or Form 26 AS that reflects all the taxes paid cut from your income or paid by you, is essential. This can be done online through the NSDL Website of (tin-nsdl.com).