The Income Tax Act of India changed how many days an Indian citizen must be outside of India to be considered a non-Indian resident. Indians now have to stay abroad for more than 240 days to be referred to as the NRI, unlike the previous 182 days. This will also affect how it is taxed.
If the NRI is located in another country that is not considered to be a resident of that country, it is considered to be resident in India and is taxed on its worldwide income.
This stay can be for the purpose of travel, work or exercising an appeal. This does not mean a change in citizenship. India has very few countries that have dual citizenship, and the person can have both Indian and foreign citizenship. The United States, for example, is not a country that has dual citizenship under Indian law.
Have you recently moved to the United States or another country? Or are you about to take this big step? You don’t just have to pack your bags and board a flight. There are some important formalities to complete before you embark on this long trip abroad.
Steps that NRI should take before moving out of India
- Notify all financial institutions
Once your travel plans have been confirmed and you are certain that your move will take more than 182 days outside of India, you must notify all insurance companies, banks, lockers and other financial institutions, including long-term savings and retirement savings accounts, of your move, after the NRI status has changed ,
A non-resident external account (denominated in rupees) allows you to transfer funds outside of India and has the added benefit of being tax free. Another alternative is to open a Foreign Currency Denominated (FCNR) account, which you can use to bring your foreign earnings to India.
You may want to appoint a trustworthy and reliable person to act as a proxy. This can be a trustworthy friend or close family member who can act in your place and handle all the paperwork in India on your behalf. This includes all activities that require your signature, including all financial permits required in India.
- Convert existing Indian bank accounts to NGOs
Your local bank should be informed of your status change. As a result, your existing bank account should be converted to a non-resident normal account. This works as a regular savings account and can be used to make regular rupee payments within India. This account accepts foreign earnings that are converted into Indian rupees.
This includes all shared accounts that you keep. If you are the primary operator of the account, you must provide affidavits and powers of attorney to the secondary account holder so that he can act in your absence.
- Convert Demat accounts to PIN accounts
If you had a DEMAT account before changing status to NRI, you can still be the owner, but are not repatriable. No participation in agricultural or real estate-related activities can be made on these accounts. Instead, it is advisable to open a portfolio investment account that is mandated for NRIs wishing to invest in listed securities.
According to a recent announcement by the Indian government, all retirement funds and national savings bonds that serve as long-term savings can only remain valid until they expire. NRI is not allowed to start a new one, expand it or withdraw, and take it to a foreign country. Instead, it has to be paid into an NGO account.
Abroad, there are several ways to continue repaying loans. As soon as your status changes to an NRI, you need to find reliable transfer tools. CompareRemit is an ideal marketplace for wire transfer agencies that help send money back to India.
In most cases, NRIs are not insured for health insurance abroad. It is advisable to take out travel health insurance that is covered worldwide. Visitor coverageFor example, has many options that cover travelers abroad. Depending on factors such as age, length of stay and physical condition, there are many options like Cover America Gold that cover the insurance needs of most travelers.
Life insurance conditions should be reassessed when you leave India.
Once you are an NRI and live in the United States, the United States government has ordered that you report all earnings generated outside of the United States. This applies to everything that is earned from rental properties or fixed-term deposit accounts in India. FBARs must be submitted annually. Otherwise, the U.S. government can impose severe penalties. There are no taxes below $ 10,000; only reporting is required.
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