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NRI Banking 101: A Beginner’s Guide to Managing Money in India from Abroad
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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.
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India’s well-structured banking system along with a host of digital banking facilities, makes it easy for you, as an NRI, to continue maintaining your accounts in India. However, transitioning from a Resident to an NRI brings with it a few basic questions about your existing banking and financial accounts in India; What happens to your existing savings and investments when you move overseas? Are there limitations on investing in India or repatriating funds abroad? How do you handle tax implications across two countries?
With Kotak Mahindra's NRI banking solutions, you can navigate these complexities with ease. From managing routine bill payments to making strategic investments, understanding NRI banking fundamentals helps ensure seamless financial management across borders. This guide explores essential strategies to effectively manage your money in India while living abroad.
NRI Banking 101: How to Manage Your Money in India from Abroad
Here’s what we’ll cover in this article:
Explore the Different Types of NRI Bank Accounts
First, let’s understand the different types of NRI bank accounts that you may need to open based on your financial needs and goals:
An NRE account allows NRIs to deposit foreign earnings (in INR), which are subject to full reparability. It means that you can transfer the money back to your resident country without any restrictions. You can remit money earned abroad in foreign currency, which is then converted to INR at prevailing exchange rates. Kotak Mahindra allows you to open NRE savings, current and fixed deposits.
The NRO accounts enable you to park your income earned in India. The interest earned on deposits in an NRO account is taxable. The repatriation of principal amounts is subject to restrictions under the Foreign Exchange Management Act. NRIs can repatriate up to USD 1 million per financial year from NRO accounts for capital income, while current income like rent or interest is repatriable without limits after tax. With Kotak Mahindra’s NRO savings, current and Fixed Deposits, you can manage your India earning smoothly.
An FCNR account allows NRIs and Persons of Indian Origin to make deposits in foreign currencies, including the USD, GBP, EURO, AUD, SGD and JPY. It protects the depositors from exchange rate fluctuations. Do note that FCNR deposits can be booked only through funds transferred via inward remittance from abroad or from existing balances in an NRE account. Both principal and interest can be repatriated, allowing NRIs to transfer money abroad without any restrictions.
Strategies for Managing Your Money in India as an NRI
It is crucial to inform your bank of your status change. You have the option of switching your existing resident account to an NRO account, which ensures compliance with RBI regulations.
Changes in residency impact your investments in India, and that’s why, before obtaining an NRI status, ensure that you review your investments.
Public Provident Fund - Being an NRI, you're not allowed to open a new Public Provident Fund (PPF) account. If you already held one before becoming an NRI, you can continue it until maturity, but cannot extend it beyond that. Plus, you will be ineligible for maintaining regular savings accounts or postal schemes.
Mutual Funds – you can continue to hold your Mutual Fund investments made as a Resident Indian. However, you will need to close your existing Mutual Fund Investment Account and open a new account in NRO status.
Demat / Trading – You will have to close / re-designate your Resident Demat account and open a new Trading account in the NRO category. You will need to transfer the stock holdings, if any, to the NRO Demat account.
NRIs can repatriate up to USD 1 million per financial year from NRO accounts for capital income such as sale proceeds or inherited assets. However, current income like rent, dividends, and interest is freely repatriable after taxes are paid. Any transfer beyond the prescribed limit requires RBI approval.
Not all digital banking features are available to NRIs. Check with your bank for details. For instance, Kotak’s mobile banking platform allows NRIs to access services like fund transfers, investment management, and bill payments from overseas.
As an NRI, your ability to invest in mutual funds may be limited. Explore eligible options and refer to our detailed investment articles (linked here and upcoming) for guidance.
Ensure your country has a Double Taxation Avoidance Agreement (DTAA) with India to avoid paying tax twice. Also, check if UPI services are enabled in your resident country for seamless transactions.
Summing Up
Managing your money in India from abroad is not daunting anymore – thanks to Kotak Mahindra Bank’s NRI banking solutions, which are just a few taps away. Start by opening the correct NRI bank accounts and start making remittances, investments, and transfers hassle-free. With our intuitive interface, navigate your finances online with ease and enhance your wealth in India. So, open your NRI bank account with us today and speed up your financial growth.
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