Key Financial Steps to Take Before Moving Abroad

Moving abroad for a job or higher education?

Congratulations are in order!

You are embarking on a thrilling new adventure. But before you book the tickets, plan your stay abroad, and start packing, there’s one important thing to consider—your finances.

Moving to a new country requires a thorough review of your finances, as they require a complete revamp. Many banking products are tailor-made for your needs, and converting your existing savings account to an NRO account and opening an NRE account might be a good option. Moreover, expense management is also important as you move to a new country to spend wisely and avoid financial strain.

To simplify your job, here is a quick guide to help you with a smooth financial transition.

Tips to navigate finances when moving abroad
 

Here are some financial actions that are a must when you are moving abroad –

1. Understanding legal and tax implication

   ● Converting your resident savings account to NRO

   Changing your residential status from “Resident Indian” to NRI means converting your resident savings account to an NRO account. IDFC FIRST Bank allows you to retain the same account number (no changes in standing instructions). This change is required as per regulations. To park your overseas income, you can evaluate opening an NRE account. What’s more, interest on this account is exempt from TDS in India.

   ● Opening an NRI bank account

   How do you bank in India if you close your regular savings account?

   The answer is through an NRI bank account. Depending on your needs, you can open a Non-Resident Ordinary (NRO) Savings Account or a Non-Resident External Savings Account.

   The NRO account is meant to credit income earned in India, while the NRE account transfers income earned after moving abroad.

   ● Understand the tax filing process

   As you start earning foreign income, you will also have to pay tax on it. Not in India but in the country that you live in. Thus, you need to know and understand the tax filing rules of your domicile country. Initially, you can hire professional tax consultants to help you understand the norms and save tax.

   You are liable to pay taxes in India for the income earned there. If you live in a country with India's Double Tax Avoidance Agreement (DTAA), you don’t have to pay double tax on the same income. Understand the DTAA rules and file the due taxes.

2. Managing investments

   ● Liquidate your assets

   When moving abroad, tracking all your investments in India can become challenging. Moreover, you might need funds to move and settle in a foreign country. As such, you might liquidate some of your existing investments to generate funds. This would lighten your Indian portfolio, give you funds to overcome initial teething issues, and start building an international portfolio.

   ● Managing shares and mutual funds portfolio

   If you have invested in equity shares or mutual funds, there will be changes in your investment accounts. Here’s how –

   o Equity shares -If you have invested in equity shares, you must convert your Demat account into the appropriate trading account for further management and transactions.

   o Mutual funds - After moving abroad, you must submit fresh KYC documents. Your residential status in your folios would change. Moreover, some mutual funds will not allow fresh investments if you move to the USA or Canada because of the complicated FATCA (Foreign Account Tax Compliance Act). Thus, you might be barred from making fresh investments and might even have to liquidate your existing folios.

3. Budgeting and expense management 

   ● Know the impact of exchange rates

   If you send money to India or transfer funds abroad, know the impact of exchange rates. In both cases, currency conversion is applicable, and knowing the effect of exchange rate fluctuations is wise. It will help you avoid unnecessary losses on currency conversions.

   ● Effective budgeting

   Moving abroad can throw your average monthly budget in a tizzy because expenses usually multiply in a foreign country. In such cases, you need to manage your budget effectively. Here are some practical tips that can help – 

   - In the initial few months, stick to the bare essential expenses. Cut down on eating out, conveyance, and fuel costs, etc.

   - Plan an emergency corpus and set it aside for unexpected contingencies

   - Focus more on savings

   - Look for deals, coupons and discounts that help save household and lifestyle expenses

   - Try and do the house chores yourself, as domestic help might be expensive

Leveraging international banking services for financial ease
 

While an NRI bank account is necessary to bank in India, you can leverage the NRI banking services offered by banks for easy and secure transactions. Choose a bank which offers specialised and tailored banking facilities for those moving abroad to simplify financial complexities. IDFC FIRST Bank’s NRI banking services are a leading example.

With IDFC FIRST Bank, you get –

● A choice of NRI Savings Accounts with interest rates going up to 7.25% p.a.

● Monthly interest credit to build your savings account corpus

● A range of investment solutions

● One-click investment in Portfolio Investment Scheme (PIS)

● Attractive exchange rates to help you save on every domestic and international transaction

● A dedicated relationship manager to handle your needs

● The best-in-class mobile banking app with access to most of your banking needs

The bottom line
 

Do your financial homework when moving abroad. This will give you a better understanding and grip on your money, investments, and liabilities. You can seek the help of professionals in India or abroad for financial management.

Start by opening an NRI bank account, and IDFC FIRST Bank can be the right choice. Open the account digitally and get easy banking solutions right at your fingertips. Navigate the financial maze with a trusted guide and make your move financially easy, convenient, and hassle-free.