Before you board that plane and bid your good-byes to loved ones, you should do a quick check on your bank accounts here in India lest your loved ones then face the hassle of co-ordinating between your bank branches here in India and you overseas!
If you are going abroad for work for the first time, and you have a valid appointment letter which certifies that you are going to be overseas for work for more than 181 days, then while you will gain your NRI status in the next 181 days, however you can open your NRI accounts before you travel overseas.
Banks call you "First Time Travellers" and open the NRI accounts based on the declaration that you are going to be away from Indian shores for the stipulated period.
However, you already have accounts, deposits and Investments in various banks in India. What happens to them? Here is a quick reckoner on those accounts?
Account in your name
All resident accounts in your name should be converted into NRO accounts on you informing the bank about your change in status. The important element in this is the change in the taxation status as well. The interest income that you earn on your NRO accounts will now be taxed at 30.9%.
Account jointly with your Wife
If you hold an account jointly with your wife/any other resident Indian where you are the first holder and your wife is the second or the joint holder, then that account will also be converted into an NRO account on you informing the bank. Taxation status is same as said above.
Account with your wife as first holder and you as a joint holder
If your wife or any other resident Indian is the first holder of the accounts and you are a joint holder then once you update your status as an NRI, your operating pattern will be on a former or survivor basis which means that you cannot operate the account until the first holder of the account lives.
All your resident deposits will be designated as NRO deposits. While the contracted rate of interest will not change, until maturity, once your status as an NRI is updated, the withholding tax applicable will change to 30.9%.
Prior to 2003, NRIs were not even allowed to make contributions into existing PPF accounts, that is, accounts opened before they became NRIs. However, in 2003, a notification (MOF (DEA) No GSR 585 (E) dated 25.7.2003) was issued permitting NRIs to continue investing in existing PPF accounts till maturity. An NRI can continue to invest in an existing account, that is, an account that he opened prior to becoming an NRI.
An NRI can use funds in the NRE account or the NRO account to make investments in the PPF account.
Demat and Stock holdings
An NRI customer can invest or trade in shares and stocks through the secondary market only through a designated account called as PIS (Portfolio Investment Services). If you have existing shares then you will need to open a PIS account and notify your bank to transfer the shares under that holding so that in future when you wish to sell these shares you can do so through the PIS route.
Open an NRE account and add a Mandate Holder
Before you go overseas, open your NRE accounts in India and add a mandate holder to help you with the daily banking needs while you are there. When you start getting paid in dollars, you can then remit money into your NRE accounts in India and your mandate holder can take care of your investments here.
With these basics done, you are set to travel overseas and conquer the world! Good luck!
About the Author:
The author, Daisy Fernandes has a Masters in Management from SP Jain, a Banker by profession and currently pursuing CFP certification. She can be reached at firstname.lastname@example.org