Thu, May 12, 2011 | Updated 05.

08PM IST
Everyone is an authority on everything these days. Take weight loss for instance. Everyone will have a tip or two to offer, much of it common sense; eat healthy,
exercise daily, sleep well. The problem is, when it comes to things that are beyond common sense, there is very little advice out there; things like tax issues, legal
matters and procedural affairs. That's why, when I saw a large number of discussions about 'what to do when you become an NRI' on various online forums, I
decided to dive deep into the topic.
So if you've got the opportunity to work and live outside India for a few years, among all the planning and packing, don't forget to tie-up a few financial loose-ends.
Here are five things that you must do before you get on that flight:
1. Convert your bank savings account into an NRO account
Why: Because the Reserve Bank of India says so in its circular: RBI/2007-2008/242 Master Circular No. 03 /2007- 08.
What is an NRO account: An NRO account is like your regular bank savings account but has certain restrictions. In this account you can deposit your rupee
earnings from India such as rent, interest, dividends etc. You can also deposit funds from abroad that are in the form of freely convertible foreign currency. You can
issue cheques for all local payments, EMIs or investments through this account.
Repatriation: You can repatriate (that is transfer to a bank account outside India) all current income such as rent, interest, dividends etc that you earned in India.
Apart from that, if you made any capital account transactions like sale of property or investments, and if you got the sale proceeds in the NRO account, you can
repatriate up to USD 1 million per calendar year. However, you would need to produce a certificate from your chartered accountant declaring that all taxes on the
funds have been paid. Only then will the banker permit the repatriation.
Interest rates and taxability: The interest will be the similar to the interest on a regular savings bank account, that is, around 3%. The interest will be taxable and
tax will be deducted at source at the rate of 30.9%.
How to convert: Visit your bank branch and fill up the required forms. You would need to submit two photographs, a copy of your passport and copy of your visa.
Already moved abroad? If you have already moved abroad without completing this formality, you can get copies of all your documents attested by the Indian
Embassy or Notary and send them to the branch.
2. Close your existing demat account, open an NRO demat account and open a new demat under PINS
Why: Sandeep Shanbhag, Director, Wonderland Investments and an expert on NRI matters explains, "An NRI has certain restrictions when it comes to investing in
Indian equities. For instance, an NRI cannot invest more than 5% in the paid up capital of an Indian company. In order to keep track of these restrictions, the RBI
requires you to make these changes in your demat accounts."
For your existing shares: As an NRI you cannot continue to operate your regular demat account. Your existing demat account, which holds shares that you
purchased while you were a resident Indian, will have to be closed and you would need to transfer the shares to an NRO demat account. You can continue to hold
these shares or sell them. If you sell them, the proceeds are credited to the NRO savings account and there are restrictions on repatriation. That is, you can
repatriate up to USD 1 million per calendar year (including all other capital account remittances) but you would need a certificate from your chartered accountant as
mentioned earlier.
For buying shares as an NRI: If you want to buy shares as an NRI, you would need to open a demat account under the Portfolio Investment Scheme (PINS). In
this demat, you can buy shares with funds in your NRE account and sale proceeds can be credited to NRE account for repatriation. If you choose to buy the shares
on non-repatriable basis, then, the proceeds will be credited to the NRO account. You must maintain two separate demat accounts for repatriable and non-
repatriable shares. Recently, the RBI also specified that an NRE must have a separate account linked to the PINS demat account. It cannot be the NRO or NRE
account through which other routine transactions are conducted.
Once you become a resident again, you must close the PINS account.
How to do this: Your demat service provider will be able to help you with all of the above. You would need to submit documents such as passport and visa to do the
same.
3. Give power of attorney to someone in India
Why: It is just operationally easier if you have someone you trust manage your bank accounts and other financial transactions for you.
What transactions are covered: A power of attorney can be given to mange almost all your financial matters including operating bank accounts, buying and
selling real estate, renting out your property, signing your tax forms, issuing cheques from your account etc.
What is not covered: A POA holder cannot open bank accounts on your behalf. He can only operate bank accounts once they are opened. Further, according to
12 MAY, 2011, 04.25PMIST, DEEPA VENKATRAGHVAN,
Answers to question in all NRIs' minds - 'What to do when you become an NRI'
High Yield Muni Bonds : www.RBCBondsearch.com - Find Tax Free Municipal Bonds by State, Maturity &
Credit Online!
Ads by Googl e
5/12/2011 Answers to question in all NRIs' minds -
indiatimes.com//8271141.cms?prtpa 1/2
RBI's circular RB/2004-05/394
A.P. (DIR Series) Circular No. 37 a resident holder of POA cannot repatriate funds outside of India. He can only repatriate funds to the foreign bank account of the
account holder.
How to make a power of attorney: The operational word here is 'trust'. Remember that power of attorney is like giving someone the key to your locker. So only
assign it to someone you trust completely. Having said that, there are two types of power of attorneys: a general POA and a specific POA. A generally power of
attorney gives sweeping rights to the holder to conduct a broad number of transactions on your behalf, such as banking transactions, real estate transactions. The
specific power of attorney is more restrictive in that each power of attorney defines a specific scope such as power to rent property, power to issue cheques on your
behalf etc., thus implying greater safety.
Make sure you contact a lawyer to do this the right way. Submit attested copies to the concerned service providers such as mutual fund house or bank.
4. Open an NRE account if you may have substantial repatriation requirements
Why: Because an NRE account can offer certain benefits over the NRO account for those who might have repatriation requirements. While it is possible to open an
NRE account even from abroad, it is operationally difficult. So you may as well open it before you leave.
What is an NRE Account: You can open an NRE savings account, current account or fixed deposit. You can deposit your funds from abroad into NRE savings
accounts. You cannot deposit local earnings like rent, interest, dividends into this account but you can use NRE funds for making local rupee payments. You can
also use these funds for investment purposes, the sale considerations of which you want to repatriate.
Repatriation: You can repatriate any amount of any kind from the NRE accounts. There is no restriction, ceiling or chartered accountant certificate needed.
Interest rates and taxability: On your NRE savings account you can earn an interest of around 3% while on the NRE fixed deposit, you can earn between 2-4%
depending on the tenure. Interest on NRE accounts, whether savings or fixed deposit, is tax free.
How to open: The procedure is the same as with NRO account
Already moved abroad: Again, follow the same procedure as with NRO account
5. Inform your other service providers like mutual fund house and insurance company
Why: Firstly because the KYC Norms (Know Your Client) require you to do so. "Even otherwise," explains financial domain trainer PV Subramanyam, "in case of
mutual funds, if you plan to sell your holdings while you are abroad, your fund house would need to deduct TDS from the proceeds. It would be better to inform them
of your change in status."
In case of your life insurance policy, the repatriation of maturity proceeds would depend on the account from which you make the premium payment. As per the RBI
regulations, the claim amounts can be repatriated in proportion to the premiums received from an NRE Account or by way of remittance through normal banking
channels. Hence, depending on your period of stay abroad, you can decide how to make the premium payments.
How to do it: Your agent or branch will be able to help you with these formalities.
Get a Quote
Type Company Name
Browse Companies
A B C D E F G H I J K L M N O P Q R S T U V W X Y Z | 1 2 3 4 5 6 7 8 9
Home | News | Markets | Personal Finance | Mutual Funds | Inf otech | Jobs | Opinion | Features | Videos | My Portf olio
Other Times Group news sites
Times of India |

5|=|l-5 | | Mumbai Mirror
Times Now | Indiatimes

|

Living and entertainment
Timescity | iDiva | Bollywood | Zoom
Networking
itimes | Dating & Chat | Email
Hot on the Web
Hotklix | IPL Schedule 2011
Mothers Day | Mothers Day SMS
IPL 2011 | Volkswagen India
Services
Book print ads | Online shopping | Business solutions | Book domains | Web hosting
Business email | Free SMS | Free email | Website design | CRM | Tenders | Remit
Cheap air tickets | Matrimonial | Ringtones | Astrology | Jobs | Property | Buy car
Bikes in India
About us / Adverti se wi th us / Careers @ TIL / Terms of use / Privacy Pol i cy / Feedback / Si temap / Code of Ethi cs Copyright 2011 Times Internet Limited. All rights reserved.
5/12/2011 Answers to question in all NRIs' minds -
indiatimes.com//8271141.cms?prtpa 2/2