There are many reasons most of the NRI’s want to keep the bond with their mother country. Investing in India is one of the them. Today, a stable economy and flexible investment climate attracting many NRIs to invest in India. However, many NRIs find it hard and confusing to manage their bank accounts and investments in India due to inadequate information, complicated taxation rules and lack of guidance.

Here are few important points for NRIs who want to manage their investments and bank accounts in India. This is a small attempt to cover all the important information which will help to understand and take sound decision.

Who is NRI?

 Let’s first understand Who is NRI? There are two different definition of ‘NRI’ as per Income Tax Act and FEMA.

As per section 6 of Income Tax Act – An individual is said to be NRI if he is not residing in India and an individual is deemed to be resident in India in any previous years if he satisfies any of the following conditions:

• If he is in India for a period of 182 days or more during previous year OR
• He is in India for a period of 60 days or more during previous year and 365 days or more during 4 years immediately preceding the previous year.

A Person of Indian Origin (PIO) is defined under Income Tax Act as: ‘

.Held Indian passport at any time OR

.Grandchild of citizen of India OR

.Spouse of an Indian citizen Or

.Spouse of a person covered under above first two points.

However, as per Foreign Exchange Management Act, FEMA – ‘NRI is a person who is citizen of India but residing outside India’.

NRI Bank Accounts

As per Reserve Bank of India (RBI) rules, an NRI cannot hold domestic saving account(s) in India after change in status. All resident savings account(s) should get converted to NRO (Non-Resident Ordinary)  account(s). Any NRI holding resident saving account without informing bank could attract penalties. Therefore, if you still holding your resident Indian account, better t’s inform your bank about status change and convert it to NRO. The process of converting resident account to NRO is quite easy and can be done online.

Opening an NRE (Non-Resident External) account is also recommended as NRE bank account is for transferring/ keeping foreign currency earned by NRIs. NRI can deposit only foreign currency in NRE accounts.

Updating KYC and status

 It is important and mandatory to update status as NRI in all bank accounts and investments in India. This also includes updating KYC (Know Your Client) details in bank, investments like mutual funds, demat/trading account, NPS etc. Also, update your new address in all bank accounts and investments.

Fixed Deposit

 Since an NRI cannot operate through a normal resident bank account, he can invest in such instruments with Non-resident Rupee (NRE), Non-resident Ordinary Rupee (NRO) or Foreign Currency Non-resident (FCNR) accounts, which are exclusive to foreign residents. The rate of interest depends on the tenure of deposit and varies from 6% to 7%.

Stock investments

NRI’s are allowed to invest directly in stock market through NRI demat and trading account linked to NRE or NRO account. PIS (PINS) account may require through an authorized bank branch/broker. But redemption proceeds are granted both on repatriation and non-repatriation basis.If you are already investing in Indian stock market  before becoming an NRI then you continue with these investments after updating your KYC, NRI status, linking your new demat account and NRO/NRE account.

Do note that NRIs are not allowed to participate in intra-day trading.

Mutual Funds Investments

NRI investors from all over the world can invest in any Indian mutual fund schemes but USA & Canada NRIs have limited options. However, before making an investment, the investor should confirm about DTAA (Double Taxation Avoidance Agreement). Otherwise, the investor might have to pay double tax as per the law. For NRIs in USA or Canada, it’s recommended to avoid investing in Indian mutual funds. Because in USA or Canada, ‘Notional Gains’ on Indian mutual funds are getting taxed.

If you already have any investments in Indian mutual funds, then better to redeem your funds and invest it in other options. For USA and Canada NRIs, direct equity or  ETFs are best options.

Insurance

 If you have any Term insurance or health insurance plan in India, you can keep the coverage. This health coverage can help in any illness OR if you like to take any treatment in India. Also, in case you are planning to return to India this will help you to continue with policy with low premium.

Credit Cards

Almost all the banks in India provide credit cards backed by FD (secured card). Such card holders can get up to 80% of the fixed deposit as credit card limit and must maintain the fixed deposit as long as they hold the card.

EPF & PPF

If you have money invested in EPF (Employee Provident Fund) with previous/current India employer, but have no plans to return to India for good OR anytime soon, better withdraw money from EPF and invest the money elsewhere. NRIs are not allowed to invest in PPF (Public Provident Fund), but if you have invested in PPF before becoming NRI then you can continue with it.

NPS

 National Pension Scheme (NPS), a Government sponsored Scheme is another great option where NRIs can put their money in. NPS is often referred as a perfect solution for retirement planning. In the recent past, an array of changes has been brought into the scheme which makes it look more attractive than before. If you already invested in NPS before then do not forget to update your NRI status. You can submit a duly signed and filled form for status change with all required documents to your nearest PoP. Form is also available on NPS website.

Note:- If you are planning to retire in India then NPS could be a great option.

Additional Notes:

1. If you have your voters ID, PAN card and Aadhaar card then keep them as it is. Aadhaar card is not mandatory for NRIs. But in case you have, then keep it available.
2. Income Tax- Consult a Chartered Accountant for your India taxation, investments and returns filling.
3.  FATCA is applicable in four countries now- USA, Canada, Australia or Denmark.
4. Make sure to make a Power of Attorney (PoA) arrangement and register it in India. In critical times it will be really helpful.