Indians migrating to other countries is a common occurrence. In fact, according to a World Economic Forum report, in 2015, 15.6 million people born in India were living in outside their country of origin. It further says that the number of international Indian migrants has more than doubled in the past 25 years, growing almost twice as fast as the world's total migrant population.
The most popular destinations for settlement by Indian migrants in the more recent decades include the Middle-East, North America and Europe.
Moving to a different country is a major and sometimes permanent change, requiring you to get many issues sorted before you leave. Here are 7 such financial tasks to complete before you move abroad:
1. Sort your bank account
If you no longer reside in India, you cannot hold an ordinary bank account in the country. You will need to convert it into an NRO (Non-Resident Ordinary) account. This will maintain your balance in the account in Indian rupee denomination and will come with facilities like a domestic debit card and net banking facilities, which will come handy when you visit the country, to make local payments.
This account will serve well to receive any income like rent or dividends from stock investments earned in India.
Ideally, if you have multiple accounts, it is best to merge them into one or close them to simplify taxation matters. You can also jointly hold this account with an NRI, PIO or OCI.
You can open one at your exiting or another Indian bank of your choice by submitting necessary KYC documents, like copies of passport, visa or work permit. You will also need to submit the necessary application form with signatures of all the account holders.
Note that interest earned on these accounts are taxable and there are restrictions on how much can money can be repatriable each year.
You can also open an NRE (Non-Resident External) account after you move abroad. This account will hold your money in non-Indian currencies.
For example, you will be able to transfer your income earned in US dollars to this account held at an Indian bank. The benefit is that this account will be maintained in dollar-denomination and is tax-free. The money in this account is also freely repatriable, without restrictions on the limit and can be converted into rupees if you wish to use the amount in India.
You can also hold this account jointly with an Indian resident (for example, if your spouse lives in India) for them to withdraw money in rupees.
2. Liquidating your assets
Unless you have a job waiting for you in the country you chose to move in, you will need some ready cash to arrange basic living requirements like house, clothing, food, etc in the new place of residence. The amount required will vary on how expensive or cheap the city you plan on moving to is.
Moreover, the decision to liquidate will depend on your personal needs and financial goals. You have to ask yourself if you wish to stay invested in the assets you have.
In countries like the US or Canada, the resident have to comply with the provisions under Foreign Account Tax Compliance Act (FATCA) for all the earnings made from investments outside the country of residence. You have to decide if the earnings you make from your investments are worth all the trouble of compliance requirements.
If you have a house or land in India, the decision to liquidate is also personal. While you can rent out the property during your stay abroad, you may need someone within India to look after the property from time-to-time in situations like a change of tenant or an incident of theft or fire. You will also need to take care of expenses associated with the maintenance of the property, taxes, and utility bills.
3. Demat account
If you decide to liquidate your shares or other securities held in your demat account, you can do so and close the account.
However, if you plan on holding on to those investments, you can designate your demat account to an NRO or NRE account. Earnings made from investments in India can be routed to the NRO account, whereas earnings on investments made abroad could be sent to the NRE account.
4. Mutual funds
If you have a mutual fund portfolio maintained with an asset management company in India, you will have to update your NRI status in your KYC details and link the portfolio with your NRO account.
However, before you do that, you will have to talk to your portfolio manager on the AMC's policies regarding NRI investments and also weigh in the extra costs of having to maintain the portfolio.
Accordingly, you could decide if you wish to exit from the investment. You will have to find out the exit load on premature withdrawals.
5. PPF or NSC
An NRI is not allowed to invest in government-backed schemes like PPF (Public Provident Fund) or NSC (National Savings Certificate). However, if a person who has an account and later becomes an NRI is permitted to continue holding the account.
Such a person cannot make fresh deposits but will continue to earn interest on the amount already contributed towards the scheme. At the end of the tenure (15 years for PPF and 5 years for NSC), the account holder will receive their deposits and interest earned in full.
If you wish to close the account before maturity, you can do so if the PPF account has completed 5 years, however, you will be subject to premature closure charges and not get all the amount you had deposited.
You can hold on to your life insurance if you have dependents in India, in fact, it makes sense to have it in India.
As for other insurance plans like vehicle insurance or health insurance, it will not be required. This is because, ideally, you would be selling your vehicle before you leave, and health insurance can be purchased in your new country of residence or you may get a health cover from your employer.
For policies that you plan on maintaining in India, make sure to pay your premiums on time to avoid lapses.
7. Income Tax requirements
It is a good time to hire a chartered accountant to get your taxes filed before you leave. As for the income you earn from bank deposits or mutual funds, the respective entity (bank or AMC) will be deducting taxes and paying to the government on your behalf.
However, it is ideal to hire a CA to seek clarity on your tax situation, depending on your income-earning assets in India and the country you plan to move to, in order to avoid double taxation and other hassles.