8 NRI Banking Tips - Personal Finance Tips for NRI account

Moving abroad can be an exciting experience. New opportunities, new cultures and new people await you. But before you leave, you need to get a handle on your finances in India by transitioning to an NRI account. This is important since your status as a non-resident Indian differs under the FEMA (Foreign Exchange Management Act) and Income Tax Act.

Here are eight measures you need to take to facilitate NRI banking before you book your flight
 

Repurpose your bank account
 

If you have multiple bank accounts in India, it is best to consolidate your finances for ease of accounting and proper tax reporting. Just hold on to one or at least two bank accounts and convert them to an NRO (Non-Resident Ordinary) bank account. All income generated in India, such as rent, dividends, investment proceeds, etc., can be deposited into your NRI account. 

Additionally, you may have to open an NRE account (Non-Resident External) if you have dependents in India to whom you wish to remit money or repatriate funds from investments over the long term. If you want to continue making new investments in India and don’t want to take currency conversion risk, invest in FCNR (Foreign Currency Non Resident) deposits.

Consider letting go of your bank lockers
 

Bank lockers can be expensive to maintain. Most banks charge a hefty annual fee for lockers and expect customers to maintain a high account balance. Consider giving up these lockers unless you have no other option for storing jewellery, valuables, or important documents. If you need to retain a locker, choose a bank where you will be maintaining your NRI bank account for better customer service.

Optimise your equity investments
 

As your status changes to a non-resident, you will have to redesignate your Demat account and strategise how you would want to manage direct equity investments. As per RBI norms, NRIs cannot trade the same way as resident Indians due to FEMA restrictions and differences in NRI taxation.

There are three ways to continue investing in Indian markets. You could appoint a mandate holder for your NRO/NRE account, give a Power of Attorney to a trusted contact to trade on your behalf, or sign up for RBI’s Portfolio Investment Scheme (PIS) through an eligible bank or broker.

Redesignate your mutual funds
 

Choose to link your mutual funds with an NRO or NRE/FCNR account, depending on whether you wish to repatriate funds in the future. For existing mutual fund investments, you will have to get a fresh KYC (Know Your Customer) done to reflect your non-resident status. You will also have to change the folios to ‘non-resident’ so that you can link them to your NRI bank account and easily manage future investments, SIPs, or redemptions from a foreign location.

Do note that if you are migrating to the US or Canada, managing mutual fund investments may become challenging. On account of the Foreign Account Tax Compliance Act (FATCA) agreement between India and the US, many domestic AMCs have discontinued mutual fund service to NRIs based out of these countries.

Put a plan in place for realty management
 

Managing real estate assets from overseas can be challenging. You must take care of maintenance charges and electricity and gas bills, pay property taxes, and oversee periodic repairs. If you have an ongoing mortgage on the asset, that is another fixed cost to account for. It’s not just paying for the maintenance and upkeep of the asset but also overseeing the work. 

In case your property is rented out, or you wish to have it leased, get a property management service on board that can take over the responsibility. The service provider will take care of everything for a small percentage of the rent (usually 3%-7%). Many savvy property management companies also offer a digital platform that allows owners to get an overview of their assets as and when they want.

Set up auto-debit instructions for life insurance premiums
 

Life insurance plans are relatively easier to manage, and NRIs can even purchase new policies for themselves or dependants without a hassle. Most life insurance companies even accept premium payments in foreign currency. It is recommended to set up standing instructions with your bank so that premium payments go through on time and your life insurance cover is not affected.

In terms of managing insurance plans, it would be a lot more efficient to convert your policies to a limited premium paying term so that you can continue enjoying the coverage without making payments over the long term. From a smart financial planning perspective, it is not recommended to surrender your insurance policy as the surrender value will be lower than the premiums you paid (on account of deductions), and buying a new policy will always be more expensive due to advancing age.

Maintain your health insurance plan
 

Just as with life insurance, avoid giving up an existing health insurance plan unless it is a financial strain. If you intend to return to India, even for a short trip, the insurance will provide coverage against any unforeseen risks. 

More importantly, ongoing health plans allow you to bypass the required waiting period (usually 2-4 years) for covering critical illnesses such as heart diseases, cancer, organ failure, etc. Irrespective of where you have been diagnosed, you can always fly back for medical treatment under full coverage if you have an existing health insurance plan. So, it is important to set up standing instructions for premium debits. Once health plans lapse, you cannot revive them. 

Hire a tax advisor
 

If you have interest in any or all of the above-mentioned assets or investments in your personal finance portfolio, you will need the services of a tax specialist. Ensure that your advisor has the requisite knowledge about international taxation and can guide you with your specific needs. The advisor should be able to optimise your tax liability and be available as and when you need them.

Conclusion
 

After moving abroad, most NRIs find asset and money management in India a tedious exercise. However, this aggravation can be avoided if you have a reliable and single service provider like the IDFC FIRST Bank. You can open different NRI bank accounts, remit and receive forex, invest in deposits, mutual funds, and stocks, and purchase life and health insurance. You can do all this from a single app and get ready support through a specialised NRI desk if necessary.

Let IDFC FIRST Bank take care of your money in India so you can focus on building a better tomorrow, no matter where you are!

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