Settle your financial affairs before moving abroad

nrinroacctsAccording to the 1999 Foreign Exchange Management Act (FEMA), one qualifies as an NRI from the date he leaves the country for employment.

When he or she becomes an NRI on account of employment, his existing resident accounts-saving, fixed deposits (FDs), recurring deposits (RDs) etc must be redesignated as an Non-Resident Account (NRO) rupee account. He is advised to inform his banker about the change in his status.

Also according to the Income Tax Act the bank is required to deduct tax at the maximum rate (presently 30.9 percent), on interest payments in NRO accounts.

While the incidence of tax deduction at source becomes higher, it could be a blessing for some tax payers as it removes the need for them to pay advance tax installments on such interest. But, in the case where the person is taxable at a lower slab rate, he may be required to apply for a tax refund, for which such persons will have to file their tax return in India to claim the tax refund.

The situation as it exists, and will continue in the future is extremely complicated, to the point where one would have to take a course in accounts and in any case appoint a banker or CA for assistance, as it is easy to misunderstand and get completely muddled, where your frustration could lead to sending you over the edge, whereas by managing one’s funds an NRI can be more secure.