It is important to remember that your status as an NRI is different under the Foreign Exchange Management Act (FEMA) and the income Tax Act. According to FEMA, you become a nonresident when you plan to move overseas professionally or for an indefinite period.
These are the things you should do before you leave:
BANK ACCOUNTS:
Get your existing resident bank accounts redesignated to non-resident ordinary (NRO) bank accounts. You may already have multiple resident bank accounts, rather than changing all of them to NRO, it’s a high time to consolidate accounts for you. Managing multiple accounts when you are away and ensuring all of them are correctly reported for taxation purposes can be challenging. Decide which account you wish to hold as an NRO account for your India-related incomes such as rent and dividends, and close the rest. Follow the same process with your bank deposits. In addition, open a non-resident external ( NRE) account, so you can use that to remit money from overseas for dependent care or investments, without giving up the flexibility of repatriating the money if needed.
DEMAT ACCOUNTS:
Just like resident bank accounts, your demat account also needs to be redesignated. You will be in a different geography and may not have the time, information and ability to spend time on your equity portfolio. Liquidating it or seeking ongoing professional advice on it, may be your alternatives. You could also consider setting up a PIS (portfolio investment scheme) account, so you continue to have exposure to equities even after becoming an NRI.
BANK LOCKERS:
Consider giving up your bank locker unless you wish to store valuables and documents in India. It may be an unnecessary annual cost if unused.
MUTUAL FUNDS:
It is critical to do a fresh know your customer (KYC) when you become an NRI to correctly reflect your new residential status. Also, get your folios changed to non-resident and have your NRO bank account linked to the folio to avoid mismatches. Just like your direct equity portfolio, evaluate the need for professional help, as you may not find it easy to manage your portfolio from a different geography. In certain geographies, like if you are moving to the US, overseas mutual funds are not the most efficient instrument to hold owing to tax considerations. Consider divesting them and using other alternative financial instruments.
REAL ESTATE:
Managing real estate can be cumbersome, as high quality property management services are not well developed in India. While you may choose to temporarily rent out your real estate, things such as maintenance bills, utilities and equated monthly installment may need to be provided for, to avoid future challenges. Think about how you wish to deal with real estate in long term, especially if you are migrating or likely to remain an NRI for a long period.
LIFE INSURANCE POLICIES:
Ensure your premiums for life insurance policies are provided for, or set up electronic instructions for their payments. While you should keep your term insurance going, it is good to evaluate which of your policies should be kept or surrendered. Also decide which ones should be converted to paid up— say, stop paying fresh premiums, but keep the policy. While the geography that you are moving to may be more efficient from a premium perspective, you may not be able to get it immediately after you move there, so keep the efficient policies going for now.
HEATH INSURANCE POLICIES:
Avoid giving up your health insurance covers in India immediately, as there could be the need to come back to India at some point for medical treatment and pre-existing illnesses tend to have waiting periods in most parts of the world. It is critical to ensure premiums are paid in time, as these policies can’t be revived once they lapse.
