Essential Financial Checklist for Indians Moving Abroad and Becoming NRIs
Moving abroad is an exciting journey, but it involves more than just packing bags and booking flights. It requires a careful financial transition to non-resident Indian (NRI) status. Without proper planning, you might face unexpected taxes or penalties. Experts emphasize the need for precise paperwork and asset management to ensure everything goes smoothly.
Update Your Banking and Investment Status
One of the first steps is to change your residency status with your bank. After living overseas for a certain period, your status shifts from resident to non-resident. You must update your PAN card and convert your bank account to either an NRO (non-resident ordinary) or NRE (non-resident external) account.
An NRE account handles foreign earnings sent to India, while an NRO account manages India-sourced income like rent or dividends. Following this, update your mutual fund KYC and change your folio from resident to non-resident. Remember, this change requires an NRO account.
Manage Assets with Power of Attorney
Handling Indian assets from abroad can be challenging. Appointing a power of attorney (POA) is a smart move. Choose a trusted relative or parent to manage physical signatures and local coordination. For instance, if you have rental property, the POA can handle lease agreements. Many people overlook this, leading to complications later.
When it comes to investments like PPF, NRIs cannot open new accounts. However, existing accounts can continue with fresh contributions and interest. Unlike residents, NRIs cannot extend the account beyond the initial 15-year term.
Review Insurance and Tax Compliance
Notify your insurers about your residency change. Even with health coverage abroad, keeping an Indian policy is wise. Treatment costs might be lower in India, making it a cost-effective backup.
Tax compliance is crucial. Update your income tax portal with your new residency status to avoid double taxation. Residents pay tax on global income, while NRIs are taxed only on India-sourced income. Failing to update can result in penalties and double taxation issues.
Clear Liabilities and Liquidate Assets
Before leaving, settle all outstanding liabilities. Unpaid credit card bills can harm your credit score, affecting future loans if you return to India.
On the asset side, consider selling depreciating items like cars instead of leaving them idle. Reinvest the proceeds wisely. A few weeks of careful planning can prevent years of financial headaches.
By following these steps, you can focus on your new life abroad without financial worries. Proper preparation ensures a smooth transition and peace of mind.
