Personal finance checklist for new non-resident Indians: KYC update, NRE account, NRO account

For some people, moving abroad for a long-term job opportunity can be a career-defining moment. Such opportunities are exciting but also require a certain degree of preparedness. One of the things you will need to prepare for is your change in residential status to Non-Resident Indian (NRI). In this article, we shall discuss a personal finance checklist of things that new NRIs need to do.

1) Update your KYC

NRIs have to update their Know Your Customer (KYC) status as per RBI guidelines. A fresh KYC will have to be done to reflect the changed residential status. These days, the Central KYC (CKYC) guidelines have made it easier to share one’s KYC status with all financial institutions - banks, brokers, insurance companies, mutual funds, etc. 

2) Convert your savings account into an NRO account

Once you update your KYC status to NRI, you will have to convert your savings bank accounts to Non-Residential Ordinary (NRO) accounts. An NRI cannot continue to operate a regular savings account like resident Indians. You can use the NRO account to deposit income earned in India, such as real estate rent, share dividends, fixed income interest, etc. You can also use it for making EMI payments and investments. An NRI can remit money from abroad into an NRO account. 

Related: Features And Benefits Of Different Types Of Bank Accounts In India

3) Open an NRE account

An NRI can open a Non-Resident External (NRE) account to deposit their overseas earnings. The funds in an NRE account are fully repatriable. An NRI can deposit money in any currency in an NRE account. The interest rate on an NRE account tends to be low, but the interest earned is tax-free.

4) Buy term life insurance

If you are leaving India on a long assignment during which your residential status will change to NRI, it is advisable to buy a term life insurance policy before leaving the country. Buying a life insurance policy from abroad after your status has changed to NRI may be slightly complicated. 

If you already have a life insurance policy and later become an NRI, you should inform the life insurance company about the change in residential status. Most life insurance policies issued in India cover you globally. However, read the policy terms and conditions or check with the life insurance company once your residential status changes to NRI.

Related: Here's How NRIs Can Purchase Term Insurance Plans In India

5) Buy health insurance

You may also wish to buy a health insurance policy before leaving India, as most policies have certain waiting periods for coverage of specific procedures. Also, the more you delay buying health insurance, the higher will be the premium as your age increases. Before purchasing the policy, check with your insurer whether the policy covers treatment outside India. If you plan to stay in the foreign country for a longer duration, you may purchase an additional health insurance policy in that country.

6) Open a Portfolio Investment Scheme (PIS) account

NRIs can open a Demat account and make their capital market investments through a Portfolio Investment Scheme (PIS) account. With PIS, you can open an NRO Demat account and an NRE Demat account, depending on your need. You can use the Demat account for investing in shares and mutual fund schemes. NRIs are not allowed to do intraday trades. They must invest and take delivery of shares. If you have an existing PPF account, and later your residential status changes to NRI, you can continue with the PPF account till maturity (15 years). However, a NRI cannot open a new PPF account.

7) Assign a Power of Attorney (POA)

While you are abroad, you may be required to sign important documents for carrying out specific transactions. You can assign a Power of Attorney (POA) to someone whom you trust (preferably a family member) to sign these important documents and make transactions on your behalf. A trusted POA can make life easier for you when you are abroad.

8) Surrender bank lockers

If you have existing bank lockers and don't plan to use them to keep any jewellery or important documents, it is better to close them before leaving India. It will help you in saving the locker rental amount.

9) Automate regular payments

While you are abroad, you may have to make certain regular payments such as utility bills, loan EMIs, insurance premiums, etc., in India. You may automate these payments from your NRO account.

10) Ensure there are no tax dues

Before leaving India, make sure all your current income tax obligations are taken care of. File your Income Tax Return (ITR) with all the required declarations. Check the ITR status until it is processed to ensure there is no notice or demand.

Related: Are You An NRI? Here's What You Need To Know About Tax Residency Rules

Last words

When you leave India for a job or business, you should focus on the purpose for which you are moving abroad. Any financial and non-financial transactions that may have to be done in India should not be a bother while you are abroad. So, it is important to draw up a personal finance checklist and act on it so you don’t face any hassles later.