Financial checklists before you go abroad

From bank accounts to insurance, transaction modalities will change

IF YOU PLAN to move abroad either for a job or for higher education, careful financial planning is essential to ensure a smooth transition. Foremost, you must inform your bank about the change in residential status and savings /current accounts should be converted into Non-resident Ordinary (NRO) to manage any future income you earn from investments in India.

The NRO account can receive any income like rent, interest or dividends from stock investments earned in India and will be handy to make local payments when you visit home. You can also open an Non-Resident External (NRE) account, neither the balance, nor the interest earned is taxable and the money in this account is also freely repairable.

For equity and mutual fund portfolio, if you plan to continue with the investments in India, you need to update the KYC details, and link the demat account and mutual fund portfolio to the NRO account. You must also address any outstanding debts or liabilities in India before you move out. You should also opt for adequate insurance cover and decide what to do with the property, vehicles, and other assets in India and do the tax planning. Review any existing retirement accounts, such as Employees Provident Fund or Public Provident Fund and understand how moving abroad may affect them.

It is important to inform the Indian bank about the individual’s plans to move abroad and understanding the formalities for running or closing the account. One should also check on the formalities for transferring funds. “Opening a new bank account in your new country is also crucial for managing your local finances. Be sure to clarify with your bank partners whether you need to maintain any Indian accounts for specific purpose, such as investments or loans,” he advises.

Need for insurance

As protecting health and wealth is crucial, evaluate the life and general insurance coverage and determine whether to modify or purchase new policies. It is vital to understand the terms of the insurance policies held by the person moving abroad and evaluating their applicability in a foreign land. When you move abroad for a job or higher studies, the status of your existing insurance policies may vary. In the case of life insurance policies, they generally remain valid, but it is critical to inform the insurance providers about the change in residency to ensure continued coverage. Health insurance policies may not cover medical expenses to check the policy terms and consider purchasing international insurance.

It is important to review other insurance policies like car insurance or property insurance to determine if any modifications or cancellations are needed based on the change in residency.”Consulting with the insurance provider and understanding the policy terms is essential to make informed decisions.

He recommends that individuals opt for an international health insurance which will provide coverage for medical expenses, hospitalisation, and emergency medical evacuation while living abroad. “It is essential to have comprehensive health insurance that meets the requirements of the destination country.

Personal liability insurance can help protect against legal liabilities arising from accidental damage or injury caused to others. This coverage can provide financial protection in case of any unforeseen incidents or accidents while abroad. Also, if you own property in India, consider property insurance to protect against risks such as fire, theft, or natural disasters. This ensures that your property remains protected even when you live abroad.

Tax laws

Researching the tax laws and regulations of your new country is important to understand your tax obligations as a resident or expatriate. Note that as non-residents are not allowed to hold any agricultural land in India, you will be required to sell any agricultural land holding before moving abroad.

Income tax returns are to be filled after the end of the financial year and in case the person is moving for less than 180 days in the previous year, he will still be considered a resident of India (for tax purposes) for that year and the global income (salary earned abroad) will also be taxable in India.

STATUS UPDATE

Convert existing bank account to NRO account to receive interest, rent or dividends earned here or for local payments

Open an Non-Resident External account to park any foreign earnings

If you are going abroad for less than 180 days, you will still be considered a resident of India for tax purposes.  

For More Details: Pooja Manoj Gupta, visit www.giia26.com
Email: pmgiia26.com Mobile 8882286639