Ronak Morjaria of apnapaisa.com discusses things to be done before becoming an NRI.
Today in the world of opportunities, many of you must be getting offers from employers to work abroad or must be planning to settle out of India after completion of higher studies. Once you settle out of India, your residential status changes to Non-Resident (NRI) after few months. But does it impact your finances?
The answer is YES. Lot of paper work has to be done, as new regulations are applicable to you. Whether your money is lying in savings account or your investment is in mutual funds and other similar investments. So what should you do before settling abroad and you turn non-resident?
Before settling abroad, you need to convert your savings account to NRO (Non Resident Ordinary) account, so that the income that you earn in India through sources like dividend, interest and rent etc. can be deposited in this account.
You can also consider opening a NRE (Non Resident External) account before you settle abroad, for depositing the income that you earn outside India. NRE account allows repatriation i.e. take back the money deposited in the account outside India. Please note, you can deposit only the money earned outside India in NRE account.
NRIs are not allowed to open fresh PPF account. But if you already have existing PPF account you can continue the same. So you should make sure you deposit at least Rs.500 in a financial year to keep the account active.
You should also note, NRIs are not allowed to extend their PPF account, thus on maturity you should withdraw the proceeds and should not extend the account even by mistake.
If you are buying life insurance policy, you need to disclose the same while buying the policy if you know you are going to settle abroad. Also, it is better if you buy life insurance (especially Online Term Insurance) since some companies do not provide it to NRIs. You also need to update your KYC status as non-resident in your existing policies.
You should make sure you have adequate health insurance cover for yourself and family in India before you settle outside India, if you are planning to come back after few years.
If you already have health insurance cover in India, you should check the terms and conditions of the policy because some insurance companies do not allow health insurance to NRIs and the most dangerous part is even if you are an existing policyholder, the policy ceases once you are a non-resident.
You should update your residential status in KYC of mutual fund. If you have ongoing SIPs you should update the bank details, if you want to use your new NRE account for auto-debit of your SIPs, so that your SIPs don’t bounce and your investment continues.
You cannot transact with your existing Demat account once you are a non-resident. So before you settle abroad, you need to open a new designated Portfolio Investment Scheme (PIS) account and transfer your existing equity shares to this new account to transact in future. NRI can buy and sell equity shares only through PIS route.
To make things simpler it is always advisable to have a 2nd holder in your investments with mode of holding “Either or survivor”, so that the 2nd holder can transact in your absence. Also, where online facility is available; like Net Banking, Demat, Mutual Fund folios, etc. you should opt for it so that you do not have to undergo paper work when you are sitting outside India.
You can transact online, no need to send physical transaction forms. One more thing that you can consider is executing a “Power of attorney”, so that certain transactions where your signature is mandatory (for example buying / selling real estate) and it cannot be executed.
So, it is better to appoint a trustworthy near and dear person (for example spouse or parents) as power of attorney, who can transact on your behalf in your absence.
These are the points which you should check out and make modifications / updations in your different investment instruments. So, you must be excited to fly abroad and live a luxurious life; but now you know you have to some home-work before you turn an NRI!!
Apna Paisa is Online marketplace for loans & investments. Author can be reached at www.facebook.com/apnapaisa.