Editor’s Note: This is a guest post from Ramalingam of Holistic Investment Planners
ARE YOU all set to go abroad and become a non-resident Indian? Change is inevitable. A person would be a Resident Indian so far. All of a sudden he could become an NRi because of an opportunity in his career. One need to be prepared for the change. This preparation alone makes the difference between an achiever and a mediocre.
It is time for you to take step to safeguard and make arrangements for your personal finances in India before you depart. Here are a few steps that you need to take before you say bye to your country and dream of a good life abroad.
NRO & NRE ACCOUNT:
The first step is the conversion of your bank savings account to an NRO or NRE account. An NRO or non-resident ordinary account is like an ordinary savings bank account that gives a domestic rate of interest. You can arrange to deposit your domestic earnings like rent, interest and dividends and remittances from abroad into this account. Cheques can be issued for EMI and investment, but there are restrictions for transferring money to the country of residence.
You could transfer current income earned in India, but transfer of sales proceeds of property and investments can be only to the extent of 1 million $’s a year. A certificate from a chartered accountant, declaring that all taxes have been paid has to be furnished. It is important noting that an NRO account invites a tax of about 30.9% at source.An NRE or non-resident external account can be opened with foreign currency when you wish to transfer substantial money to the country of your residence. There is neither restriction to remittance nor any taxes in this account, but you would only get a low rate of interest. This account offers no facility to receive incomes in the shape of rent, interest and dividends, but you can make local payment in rupees, invest money and receive proceeds from sale of investments and property.It is much easier to open both these accounts in India, with you requiring giving 2 passport size photographs along with a copy of your passport and visa. In case you are already abroad, it is mandatory to get an attestation from the Indian Embassy or Notary before sending it to the bank branch.
DEMAT ACCOUNT
The next step is to close your domestic demat account and open a non-resident ordinary (NRO) demat account under the Portfolio Investment Scheme (PINS). This is mandatory, as there are restrictions to the amount of investment that an NRI can make in the shares and stocks in Indian companies; it should not exceed 5% of the paid–up capital of any Indian company. You need to transfer your existing share holdings also into this account.
You have the option of 2 types of separate demat accounts namely for repatriable and non-repatriable shares and this account is to be separate from other bank accounts. Your demat service provider would help you on submission of copies of passport and visa. Once you return back to your country you can close the PINS demat account.
Power Of Attorney:
The third step is to give the power of attorney to someone you trust in India to manage financial transactions in bank accounts, buying and selling real estate, renting out property and signing up tax forms. The power of attorney could be general, where the authority entrusted holds good for banking as well as real estate transactions or could be specific, where the authority is restrictive to only certain transactions. Consulting a lawyer and submitting attested copies to the concerned people like banks and mutual funds proves essential.
Update your NRI status in Various KYCs:
The last step is inform the mutual fund, bank and insurance companies by submitting the updated Know Your Customer forms stating your change of status as a non-resident Indian. Your Financial Planner and Iagent and bank branch could help you best regarding the different formalities that are required.Now you are all set to assume your NRI status.
About the author:
Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Founder and Director of Holistic Investment Planners a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in
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