6 Effective Tips for NRIs Managing Their Finances Abroad
Handling your finances while you are an Indian citizen is very different from managing the same when you are a Non-Resident Indian (NRI). Whether utilizing your finances abroad in a rational manner or transferring it back to India, there are many factors to be considered which are crucial for maintaining a safe financial portfolio.
Who is an NRI?
According to the Foreign Exchange and Management Act (FEMA), an NRI is someone who stays in India for less than 182 days during the preceding financial year or someone who has an intention to stay outside India for an indefinite period to carry on employment, business, or vocation.
What is the difference between NRO and NRE accounts?
A Non-Resident External Account (NRE) is an account of an NRI to transfer foreign earnings to India. A Non-Resident Ordinary Account (NRO) is an account of an NRI to manage the income earned in India.
Read below to know about the 6 effective money management tips for an NRI.
- Open an NRE and NRO account
Once you are an NRI you are no longer allowed to operate the savings account meant for resident Indians. You are required to convert your savings account to an NRO account so that you can transact without restrictions. Once converted you can deposit your income, assets, or investments returns, even those originating locally easily to the account.
The opening of an NRE or an NRO account should be your priority. These accounts can be in the form of savings, checking, or recurring accounts.
- Assign Power of Attorney
Before you leave India it is very important that you assign a person who has the right to take care of your property in your absence. For this, you need to leave a written power of attorney for the assigned person who could be a friend, a relative or a caretaker.
In matters regarding lease or sale of property the person holding the POA can act as your representative.
- Investment opportunities for NRIs
As an NRI you should be aware of the investment opportunities that you can use in your favor. An NRI can easily invest in debt, shares, real estate, mutual funds, bank FDs, etc. With RERA and GST implementation, NRIs can benefit from the realty sector.
An NRI can no longer invest in Public Provident Funds (PPFs), but they can continue to subscribe to the ones opened before they left India and maintain it until its maturity in 15 years.
As an NRI you can purchase or sell shares through the Portfolio Investment Schemes (PIS), and transfer money abroad through the NRE account which is easier if shares are brought through them.
As an NRI you can buy at most two residential properties. There is no such ceiling on commercial properties. But you cannot buy agricultural land or a farmhouse. Though you can inherit them. All property transactions should happen through an Indian Bank in Indian Currency.
- Knowledge of Taxation Norms
As an NRI it is important that you take care of the taxation and investment norms of both countries, i.e. where you reside and India. The taxation norms are different in different countries and are regularly updated. Maintaining financial discipline and being in touch with your financial advisor is imperative.
- Make Planned Transfers
As an NRI, you would surely at some point of time make fund transfers to your home country. When making such transactions it is important that you carefully note the exchange rates, find the best possible exchange rate, compare the money transfer services, and only then should you remit funds.
- Buy Life and Health Insurance Policies
If you have dependents in India, then it is prudent that you buy a life insurance policy in India. You should check the tax implications of such a policy in the country where you live and the flexibility of submitting medical check-up reports from the country where you live.
Buying a health insurance policy can also be prudent as most Indians prefer medical treatment in India because they have their family here who can look after them. It is important that you check the geographical coverage of such a policy because you may also need it in the country of your residence.
You can also claim tax benefits under section 80(D) for a premium paid on health policy and reduce your tax liability on income accrued in India if any.
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