You’re an NRI. Congratulations.
Your NRI status affects your banking and investment accounts as well as Income tax.
As per Income tax act, an individual can be :
- Resident and ordinarily resident,
- Resident but not ordinarily resident, or
- Non- Resident
‘Non-resident Indian’ is an individual who is a citizen of India or a person of Indian origin and who is not a resident of India. You are a resident if you satisfy any of the following conditions:
- If he is in India for 182 days or more during the previous year (e.g. 2018-19); or
- If he is in India for 60 days or more during the previous year (e.g. 2018-19) and 365 days or more during 4 years (2014-15 to 2017-18) immediately preceding the previous year.
The second condition will not apply in the following cases:
- If an Indian citizen leaves India during the previous year for employment outside India;
- If an Indian citizen leaves India during the previous year as a member of the crew of an Indian ship; or
- If an Indian citizen or a person of Indian origin comes on a visit to India during the previous year.
In essence, if you leave India for employment in any financial year when your stay in India (including any travel days to & from India) is 181 days or less then you’re non-resident for that financial year.
FEMA governs your banking and investment accounts.
As per FEMA (Foreign Exchange Management Act 1999) if an individual has left India for :
- Taking up employment outside India,
- Carrying on a business or vocation outside India, or
- Left India for any other purpose in such circumstances as would indicate his intention to stay outside India for an uncertain period,
then he becomes a person “resident outside India” immediately on leaving India for the above purposes.
“Immediately on leaving India” for either of the above purposes, you become a Non resident Indian under FEMA.
Things to do after becoming a Non resident Indian:
- Income received or deemed to be received in India is fully taxable. Use your overseas account to transfer funds to your NRE account.
- Change the status of your savings accounts from resident to NRO (Non-resident Ordinary). Close those that are not required.
- Change KYC status in CKYC from resident to Non-Resident. This will change your residential status for all future investments that you do while being a Non-Resident.
- Open an NRE (Non-Resident External) savings account with a close relative as a joint account holder. (The bank will open it on a “former or survivor” basis i.e. the resident relative will be a Power of attorney holder for that account).
- Convert resident Demat account to NRO Demat account.
- Open NRE PIS (Portfolio investment scheme) Demat account, if you intend to invest in shares/ trade in stocks. You cannot use the PIS linked NRE bank account for any other purpose. Pl note – a Non-Resident cannot do intra-day trading. NRE PIS investments are 100% repatriable. You may have to approach multiple banks since staff at certain branches may not be aware of rules regarding opening and maintaining a PIS account. You will need to be very persistent in following up once you submit the account opening forms ( Bank & Securities section) as well as copies of the required documents.
- Use your NRE savings account to invest in mutual funds, if you want to invest on a repatriable basis.
- Link the NRE/NRO/Investment accounts with an Indian mobile number, which should remain active while you are overseas.
- Depending on whether your family/any dependents are staying back, make sure that they have sufficient health insurance coverage. You should ideally have a base policy and a super top-up policy to cover health emergencies. You might also require term insurance.