As you plan your visa, living situation, career or academic journey, and new life in a foreign country, it’s important not to lose sight of your finances. You want to lay down the groundwork for your banking activity to continue seamlessly in India. This involves a fairly simple process once you understand the changes you need to make and the applicable rules. Refer to this guide to set up your banking services in India before moving abroad.
Update your bank accounts: Open NRI accounts
Once your residential status changes, your banking setup in India needs to evolve. As you can no longer use your resident savings accounts, you must upgrade to NRI accounts. They help you effectively manage your income in India and abroad.
Here are three types of NRI accounts you may need:
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NRO account
A Non-Resident Ordinary account is designed for managing your income originating in India. Examples include rent, pension, dividends, etc. You can keep these earnings organised and legally compliant with an NRO account.
You can also repatriate them to your overseas account, subject to a limit of USD 1 million per financial year. The earnings on your savings depend on the interest rate and are taxable in India.
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NRE account
A Non-Resident External account is meant for depositing your foreign income. The funds are converted into Indian currency for easy management. These funds are easily repatriable if you choose to transfer them to your overseas bank account.
You only incur the cost of conversion based on the prevailing exchange rate. Also, since the income is not earned in India, the interest earnings are fully exempt from taxation.
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FCNR account
An FCNR account works like a fixed deposit where you credit your foreign income in the original currency. Major currencies such as USD, EUR, and GBP are accepted.
As no currency conversion is involved, you can avoid the risk of exchange rate fluctuations. It is an apt account if you want to preserve the value of your foreign income while earning returns on it.
Key steps to streamline NRI banking services
Once your NRI account setup is done, you can ensure it is running smoothly by taking care of these essential functions:
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Assign a power of attorney
Managing finances remotely is conveniently possible with NRI accounts. All three accounts operate digitally through the bank’s portal or banking app. However, some crucial actions may require physical intervention.
For such scenarios, you can appoint a Power of Attorney (PoA). You can choose your close family member to handle important formalities on your behalf when needed.
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Align investments with your NRI status
Your change in residential status should reflect across your investments. You can sign up for NRI-specific investment solutions.
Update your details across all investments to remain compliant and continue earning returns without disruption.
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Stay compliant with tax regulations
As an NRI, your tax obligations are closely linked to the type of income, gains, and payments. You can get an overview of the same under different sections of the Income Tax Act, 1956.
Also, review the deductions you claim against certain payments and investments. If needed, seek the assistance of a financial advisor for a better understanding.
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Reassess your insurance
If you hold insurance policies in India, it’s a good idea to review them just as you would check your investments. You might have to buy a local plan in your country of residence to cover your medical needs. Life insurance policies generally continue to remain valid worldwide. Check your policy terms for more clarity.
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Keep your KYC updated
Banks require updated records. Even more so when your residential status changes. So, make sure you keep your KYC for all financial services up to date with your latest contact details, identification documents, and overseas address.
Final words
Setting up the right banking services proactively helps you sort out your finances in India before you settle into your busy routine overseas. Start with NRI accounts to segregate your income streams. You can then proceed to streamline your payments, investments, insurance, loans, and other financial needs. As you settle in your country of residence, you can reassess your banking services in India from time to time.
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