1. Leaving India? Take Care of These 5 Money Matters

Leaving India? Take Care of These 5 Money Matters

Leaving India to settle abroad is a complex task that requires planning. One of the aspects of this move is making sure your money is secure and accessible when you’re out of the country.

By: | Published: October 4, 2016 12:11 PM
 The country that you’re moving to will have its own laws regarding banking, investments and taxation. Therefore you need to be ready to adapt to this new environment without losing control over your finances in India.(PTI) The country that you’re moving to will have its own laws regarding banking, investments and taxation. Therefore you need to be ready to adapt to this new environment without losing control over your finances in India.(PTI)

Leaving India to settle abroad is a complex task that requires planning. One of the aspects of this move is making sure your money is secure and accessible when you’re out of the country. The country that you’re moving to will have its own laws regarding banking, investments and taxation. Therefore you need to be ready to adapt to this new environment without losing control over your finances in India.

Let’s take a look at five steps you should take while leaving India.

Update your bank account

Your savings bank account is meant for resident Indians. When you move abroad, your residency status will change from resident Indian to non-resident Indian. In such a scenario, you need to either update the existing savings account to non-resident (ordinary) account or open a new account as a non-resident while closing the existing one.
There are three types of non-resident accounts that you can operate in India: non-resident ordinary (NRO) account, non-resident ‘external’ rupee account (NRE), and foreign currency non-resident (FCNR) account.

An NRO account allows you to hold the income accrued from India. The upper ceiling for repatriation to an NRO account is up to $100,000 per year. An NRO account pays an interest rate similar to a normal savings account, which is 4 per cent presently. This account can be opened by submitting a copy of your passport, a photograph, and a copy of your visa or work permit.

An NRE account, on the other hand, allows you to repatriate a higher amount without the limitations applied to an NRO account. The deposit in this account is held in rupees, therefore the corpus kept in such account is subject to currency risk. An NRE account allows an interest around 7-8 per cent. You can deposit both the income accrued from India as well as abroad in an NRE account.

An FCNR account is similar to an NRE account with the difference that it also allows deposits in foreign currencies. The interest income from NRE and FCNR accounts are not taxed in India.

Manage your investments

Take stock of all your investments before moving out of India. Make a decision about which investments you want to hold and which ones you want to liquidate.

If you have a DEMAT account with a resident status, you need to close it once you become an NRI. You have the option to open an account called Portfolio Investment Scheme (PIS) and transfer all your holdings to it before you get an NRI status.

Also, note that once you get the NRI status, you are not allowed to invest in government-backed savings schemes like PPF, NPS, NSC etc., but you can continue to invest if you already have these accounts.

If you have a property in India, you can continue to hold it or liquidate it before shifting. There is no restriction on holding a property when your residency status changes. You are also allowed to sell the property once your residency status changes to non-resident but subject to restrictions that agricultural land or a farm house cannot be sold to a person other than a resident citizen in India.

If you have somebody in India whom you can trust completely, give them the power of attorney (PoA) to act on your behalf to execute your transactions related to property, investments, and insurance.

Update your KYC status

It is very important to update the KYC status for every financial product you hold, such as mutual funds, insurance policies, bank accounts, etc. Once you leave the country, your address and residency status, both, change, and therefore it’s important to update your KYC.

Evaluate the insurance cover

Before your status changes to non-resident, ensure what all is covered in your health insurance policy outside the country limits. Normally, health insurance companies allow treatment within the country. But there are policies that also cover medical treatments in foreign lands. It is also important to evaluate your cover size. If it not adequate, increase it before your residency status changes. You can also decide to continue with your current policy if you want to retain a health cover when you return to the country.

In case of a term insurance policy, companies usually cover death risk at all locations in the world, but it is important to read the terms and conditions of the insurance policy to better understand if any locations may be excluded.
Do not forget to update your KYC details with your existing insurance company before you move to another country.

Debt and tax management

Try to close loans before you shift to another country. In case you have outstanding loan balances after shifting, try to ensure timely repayments since any instances of default would stay on your credit record for several years. You can provide a trusted person the PoA to manage your debt, and this would help you immensely after you leave the country.

You might have income-generating assets and properties in India. Any income accrued from India after you move to another country will continue to be taxed in India. Therefore, if you have a PoA looking after your responsibilities here, they can be asked to fulfil your obligations every year. While leaving India, you may be asked to provide clearances from the tax department in a specified format.

Before you shift out of the country, enlist the tasks you need to complete before you leave. Once left undone, those things may remain pending for a long time after you shift. Also, if you hold a credit card with geographical limitations, get it converted to an international credit card or surrender it. Keep in touch with your Indian care takers regularly once you get shifted to the foreign country.

The author is CEO, Bankbazaar.com

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