9 things to do when you become an NRI
Who is an NRI (Non Resident Indian)?
According to FEMA 1999, any person who stays or of the country for more than 182 days within a financial year is considered as an NRI. A financial year is calculated from 1st April to the 31st march of the next year.
When you become a sailor, you are essentially an NRI. You need to do these 10 things as soon as possible.
Note: The duty of reporting the bank of your changed status lies with you and not with the bank.
Convert your local savings account into an NRO savings account:
As per RBI guidelines, an NRI is not allowed to hold a resident savings account. A savings account which he may have before he availed the NRI status must now be converted to an NRO savings account.
It is very much like any normal savings account, one can accept payments in it in INR, pay EMIs and invest via this account. One can also deposit funds from a foreign land into this account, provided it has been converted to INR.
The documents that need to be submitted to confirm your changed status must be duly signed by a notary officer.
Tip: The interest rate earned on this account is same as that of any normal savings account. This interest would attract TDS, which is about 30%.
Convert you existing FDs to NRO FDs:
NRIs are not allowed to have FDs, so they need to convert their existing ones to the NRO FDs. Few banks automatically convert the FDs once their savings accounts have been converted, but not all banks provide this auto facility. It is your duty to go and ask them to do so. The interest earned would be taxed at 30% approximately.
Tip: Make NRO FDs in the same bank as your NRE account and use that FD for all your expenses when you are on land.
Need to open an NRE salary/savings account:
Some banks open NRE and NRO account together, but this system is optional. You can specifically ask for any one of the accounts to be opened. It’s preferred to open an NRE account because it has multiple benefits. The repatriations made via NRE account do not have any capping like NRO account (has a maximum 1 Million $ limit). NRE account has three types namely, savings, current and fixed deposit accounts.
Tip: Interest earned on NRE account is TAX-FREE. But you cannot deposit money in your NRE account in INR. However, you can very well accept money from other NRI accounts. Also, always appoint a mandate holder who can operate he account in your absence.
Have a POA (Power Of Attorney):
When you go for your sail, it is important that you provide a POA to a person you trust. In your absence, he/she will be able to perform transactions on your behalf and lower your inconvenience. Managing your finances when you are at sea is a difficult matter, especially with port stays and huge workload and the crappy quality of internet we are provided with. So it is always better to have a POA at your residence country. POA has the power to operate your account, buy/sell shares, sign tax returns, rent your property, give cheques from your account etc.
Tip: A POA cannot OPEN a new account on your behalf. They can only operate he existing accounts. It is a very important post, so be careful who you give your POA. Seek legal assistance to execute the POA deal.
Open PINS account and close existing Demat account:
NRIs have to close their existing Demat accounts and open a PINS account under their NRO account. All the existing shares they have should be transferred to the new account. NRIs have a restriction that they cannot invest more than 5% in the paid-up amount of a company based out in India.
You can handle your shares normally after that, sell/hold/buy etc. the proceeds would be going to your NRE/NRO account and would be taxable.
Note: Holding shares in a normal Demat after becoming an NRI is illegal in India. Also, it is preferred to keep two separate accounts NRE and NRO. Linking your PINS and NRE account would remove the restriction on the sale of your shares.
Update your KYC (Know Your customer) details:
Once you become an NRI, it is your responsibility to let your insurer and mutual fund provider know about the change in your status. Once you fulfill your end of the policy, your mind would be at peace.If you neglect this point then when you make a claim, the insurers can always say later that you did not inform them about your status change and decline your claim.
Note: When your savings accounts are converted to NRO, the SI (Standing Instructions) are canceled. You need to re-issue them as well.
Open a PPF account:
NRIs are not allowed to open new PPF accounts under the current law. According to an RBI circular issued in 2003, NRIs can continue their existing PPF account that they had opened before acquiring NRI status but they cannot open a new one.
Read about it here
Tip: Open PPF account BEFORE you become an NRI.
Register your Credit/Debit cards for Visa:
This is a very important point for seafarers since they have no signal on their registered phone when they are sailing. In cash you wish to use your credit or debit card online in a foreign country, at the time of performing the transaction, it would ask for an OTP to be sent on your registered number.
It would not be possible at that time, but there is another option. You can complete the transaction via online password. When you are in India, you should go to your net banking and register your card for the password.
You can perform any transaction abroad, without needing a signal on your phone. A handy thing to have in case of any emergency.
Term plan Insurer should be notified:
In some cases, if you do not inform your insurer of your status change then the policy is not valid. It’s like having no policy at all. Many policies have a geographical limitation, so you need to know the details about your policy.
Note: It is illegal to renew your plan online, which was taken by you before you became an NRI. Also, if you pay the policy premium in INR from your NRO account, the claim value would not be repatriable.
- Make sure you have an international credit/debit card. If you need cash abroad, then you should be able to withdraw from the nearest ATM.
- Change your number to a basic plan and start an auto-pay from your bank account so that you can retain your number when you come back from your sail.
- Carry an extra phone. ALWAYS.
Hope these points would help you a lot.