Many people move overseas to pursue better opportunities for further studies, jobs, projects, etc., without knowing what they need to do. Additionally, numerous NRIs remain who haven't yet complied with several mandatory requirements. It can be due to negligence or maybe a lack of knowledge.
Preparing a checklist is essential for NRIs to understand the financial, legal, and administrative problems of moving abroad. It can help them stay compliant with regulations and prevent future issues such as penalties or frozen accounts.
Here is a complete checklist for individuals planning to move out of India. Also, for those who have already moved out to secure their assets. In this blog, we have divided the NRI checklist into two main parts: steps to take before leaving India and after leaving India. Let's first understand the steps to take before leaving India.
Key Takeaways
- Change your resident bank account to an NRO account to comply with FEMA regulations.
- Build a strong credit score in the new country to secure loans, rent, and insurance at better rates.
- Try to open an international bank account via Indian banks to access foreign currency and reduce forex conversion fees.
- Assign someone to manage your financial tasks in India on your behalf before moving abroad.
What are Some Financial To-Dos Before Migrating Abroad?
Here is a list of the important tasks that you must do before moving abroad and becoming an NRI:
- Convert Your Bank Accounts
The first thing you must do before moving abroad is to convert your existing resident bank account to an NRO account. It is because when you move abroad, your residential status changes to an NRI. So, according to FEMA regulations, an NRI must mandatorily either:
- Close your existing residential savings account in India and open a new NRI account; or
- Convert your resident savings account to an NRO (Non-Resident Ordinary) account.
Additionally, you must convert your FDs as well. You need to open an NRE account to deposit the income earned outside India and repatriate it easily whenever required.
- Create a Strong Credit History Overseas
You must build a strong credit history if you have moved abroad recently. Having a good credit score in a foreign country will help you secure loans at reduced interest rates, make renting easier, and avail lower insurance premiums.
- Open an Overseas/International Bank Account
Some Indian banks provide the chance to open an international bank account through their overseas branches, allowing you to access foreign currency from the day you visit abroad. This can help you avoid the forex conversion fees that come with using Indian debit/credit cards internationally.
All credits to your international bank account must comply with the prevailing FEMA rules and the outward remittance limits set under the Liberalized Remittance Scheme (LRS). Such banks offer accounts in the local currency of your destination.
- Check Your Investment Portfolio
Once you have decided to move abroad, take time to assess your assets and investments in India. You must decide whether to keep or sell your existing investments, which may include mutual funds (MF), shares, or a public provident fund (PPF).
- Additionally, when your residency status changes to NRI, inform your bank, brokerage, asset management companies (AMCs), and insurance providers about this change. Update your KYC (Know Your Customer) details to reflect your NRI status.
- You can keep your existing MF units. However, you will need to process your Systematic Investment Plans (SIPs) through your NRE/NRO accounts.
- You must close your resident demat account and open a new NRE/NRO demat account under the portfolio investment NRI scheme (PINS) to keep investing in the stock market.
- You may continue to hold and make new investments in your existing PPF or national savings certificate (NSC) account until they mature. However, you cannot open new PPF or NSC accounts.
While you are allowed to retain your investments, remember that capital gains on them may be taxed in India.
- Appoint a Mandate Holder or PoA
Consider assigning a Power of Attorney (PoA) or a mandate holder to manage your financial and banking activities in India before moving overseas. A mandate holder can operate your bank account and make investments on your behalf, while a PoA has a broader authority for various matters.
- Stay Compliant with Your Tax Obligations
You must complete these steps before moving abroad to make sure you stay tax-compliant:
- Provide Form 30C along with the required documents, like a PAN card, to the Income Tax Department.
- Request an acknowledgment from the IT department to ensure tax clearance.
- If asked, complete the ITCC (Income Tax Clearance Certificate) application process in accordance with the IT department's instructions. Keep the original document after receiving the ITCC.
- Ensure to carry the acknowledgment of Form 30C or ITCC when moving overseas.
- Check Your Insurance Plans
Even after moving abroad, NRIs can retain their insurance policies, including life and general insurance (such as health and motor insurance). They need to notify their insurance provider about their change in residential status and update their bank account details through the insurer's specified service channels.
Additionally, an NRI must review the geographical coverage and residency requirements of health insurance policies. It is because some plans may offer coverage only for medical expenses incurred within India or strictly for Indian residents.
What are the Steps to be Taken After Leaving India?
The following are the steps an NRI must take after leaving India:
If you are going abroad to stay for an indefinite period and have an employee provident fund (EPF) account in India, you must close it within 3 years. If you don't apply for EPF withdrawal within 36 months of quitting the job, your account will become inoperative.
One must carefully consider whether to continue investing in India after moving. When it comes to investments, there are two critical obligations:
- Reporting all assets and accounts in India in compliance with FATCA/CRS.
- Including any Indian income in tax returns (after incorporating the benefits of DTAA- Double Tax Avoidance Agreement).
Since these requirements are annual, and financial years differ across countries, this may lead to confusion and potential miscalculations. Therefore, if managing investments from an NRE account in India seems complex, it can be advisable to consider investing directly through:
- Exchange Traded Fund (ETFs)
- India-centric mutual Funds are available in the resident country.
- Other investment options are accessible in the country of residence.
Additionally, NRIs can invest in mutual funds in India through International Financial Services Centers (IFSC), such as GIFT City in Gujarat.
It's wise to create separate wills for assets in both the country of residence and those held in India.
The Bottom Line
The transition to NRI status may seem exciting. However, it brings both opportunities and challenges. This NRI checklist can help you navigate the difficulties of managing your finances, legal complexities, and tax implications. Taking a proactive approach after becoming an NRI can ensure a smooth, hassle-free experience.
One such approach is seeking guidance from an expert to navigate these complexities more easily. Talking about experts, Savetaxs tops the list. At Savetaxs, we specialize in providing customized assistance to NRIs to help them handle their financial and legal responsibilities with confidence. Our team will guide you through every tax issue, ensuring precision and peace of mind.
Our team has 30 years of expertise so that you can fulfill all your tax responsibilities without any worries. Reach out to us anytime—we are available 24*7 around the globe.
Note: This guide is for information purposes only. The views expressed in this guide are personal and do not constitute the views of Savetaxs. Savetaxs or the author will not be responsible for any direct or indirect loss incurred by the reader for taking any decision based on the information or the contents. It is advisable to consult either a CA, CS, CPA or a professional tax expert from the Savetaxs team, as they are familiar with the current regulations and help you make accurate decisions and maintain accuracy throughout the whole process.
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