Becoming an NRI is an awesome thing… Though it means some paperwork. So let us guide you on what happens when your status changes from Resident to NRI. Common questions are – what happens to my bank accounts when you become NRI or what happens to mutual funds when you become NRI. So here is detail on what you need to change when you become an NRI.
Are you a resident Indian, to become NRI soon? This article is for you.
Are you an NRI planning to move back to India? Read This
Financially if you think, the change in NRI status means – change in Taxation.
We have written a detailed post on How Residency is Determined. Click here to Read
Want to Read? Can NRI Invest in Real Estate? Click Here
Hence we need to inform this change to the intermediaries managing your money (Bank, Mutual Funds, Equity Broker, PPF, NPS Etc). Here is the process of how you can do it.
Bank Account Resident to NRI
NRI cannot have an SB account. So you need to close the SB accounts or convert them to NRO (Non-Resident Ordinary).
The best practice is to close all the non-required & redundant ones and convert 1-2 accounts only.
NRO account is just like a savings account in Rupees.
If you have Fixed Deposits also these need to be converted to NRO deposits now.
You can get details on different Bank Accounts for NRIs here.
The process is simple. Just approach your bank with a proof of your overseas address, passport & VISA.
The above is general advice. But in case you are moving to USA, we would advise you to liquidate and get rid of FDs as these may involve reporting formalities to the US IRS like filling FBAR etc.
Mutual Funds
There is a likelihood that you must already be investing in Mutual Funds while being residents. So change of status from resident to NRI in mutual funds can be done in 3 steps.
- Change in KYC – can be done online & offline while visiting India.
- Informing each mutual fund (currently invested) about this change and providing them new bank details along with cheques of your NRE/NRO account.
- In case if SIPs from SB account, you need to stop them and start from NRO or NRE account.
If you are NRI of US or Canada, certain mutual funds will ask to surrender the investments. Some may ask to provide additional documents. You need to check these parameters with your current investments. MFs are PFIC and needs to be reported in US ITR. Until you are planning to go long term you may keep MFs. Otherwise, if holdings are not substantial it is better to keep a clean slate.
Also if you are investing online through MFU, NSE or BSE, you need to inform them about the change. BSE & NSE make changes in the current profile. MFU will ask for a fresh CAN separately for NRO & NRE status.
Your financial planner will help you with these matters.
PPF Account
NRIs cannot open a PPF A/C. if you have an existing PPF account you can continue contributing till its maturity (15 Years). You cannot extend after 15 years.
The process is to inform the Bank or Post Office where you have your PPF account.
Trading & DEMAT Account
NRIs cannot buy or sell equity shares like residents. They can do it by opening a PINS or PIS (Portfolio Investment Scheme) account.
So you have to close the existing DEMAT accounts. The stocks already held can be sold or transferred to a new account called the DEMAT NRO account.
The process is to first open PIS/PINS account with an authorized dealer. Inform the existing DEMAT broker about the changes.
NPS (National Pension Scheme)
NRI can open a new or continue investing in NPS. If he already is a subscriber you need to inform NSDL about the change in status from Resident to NRI through a written request or through online login.
NRI can only open a Tier 1 Account. In case you already have a Tier 2 account before becoming NRI, you cannot contribute further. You can exit also as Tier 2 has no withdrawal restrictions.
Update 30 Oct 2019: Via a notification dated 30/10/2019, PFRDA allowed OCIs (Overseas Citizens of India) will also be allowed to invest in Tier 1 NPS Account. However, like NRIs Tier 2 is still not allowed.
Further contributions have to be made through NRO or NRE account only.
Insurance Policies Resident to NRI
All policies life & general will be valid when you change your status to NRI. You just need to inform the insurance company about the change by written letters.
For Health Insurance it is better to continue if you will return in 3-5 years. Many domestic insurers do not provide coverage overseas. if you are staying there for many years to come, it is better you take a health cover there.
Changing your status and complying to all the concerned authorities is not a simple task. We often forget and then invite trouble in the future. Hope this small guide will help you identify the steps required.
Bonus TIPs:
- You should inform the PAN authority about the change of your address & status. This can also be done online here. http://tinyurl.com/2qfbov
- Being NRI you will be subject to TDS in many cases like MF investments. If you want to be familiar you should have login ID of your Income Tax, so that you can view Form 26AS.
- Try to close all debts that you can. Close all consumer loans, credit card due payments. Close such accounts which will be difficult to manage form abroad.
Feel free to add in the comments section below and if you are an NRI, share with us how you managed your transition.
