How to Manage Your Finances in India as an NRI

For those living and working in foreign countries, managing finances as an NRI can feel challenging, especially when you are managing finances both abroad and home country.

It is essential to have a proper financial structure that can help support your family, save money from unnecessary expenses and plan your financial goals such as retirement. 
In this article we will guide you on how as an NRI, you can take advantage of various financial instruments and options to manage your finances. 

1. Open the Right Type of NRI Account
To begin managing your finances especially in India, it is important to choose the right type of NRI account. As an NRI you can choose from these three types of accounts:

•    Non-Resident External (NRE) Account: This type of NRI account lets you save your earnings abroad in Indian rupees. The interest-earned from NRE savings account is tax-free in India. This is best suited if you want to spend or invest in India without losing repatriation flexibility.

•    Non-Resident Ordinary (NRO) Account: This account helps NRI manage money that you earn within India, such as rental income, dividends, pensions, or interest. You can repatriate amount up to USD 1 million in a financial year post payment of applicable taxes. This is ideal for NRIs who have ongoing financial ties to India, such as property or family expenses.

•    Foreign Currency Non-Resident (FCNR) Deposit Account:  This is a fixed deposit (FD) account for NRIs where you can deposit your foreign income in major currencies like USD, GBP, EUR, JPY, etc. Since the funds stay in your preferred foreign currency, there’s no currency conversion loss. The interest you earn in India can be transferred abroad without restriction and is generally exempt from taxation. Best for those who want stable returns without forex risk.

•    Be Aware of Taxation Rules
If you are earning income in India through property, interest, mutual fund returns, or pensions, each source is taxed differently. For instance, rent and capital gains are taxable in India, and income in an NRO account is subject to Tax Deducted at Source (TDS).

Verifying whether your current country of residence and India have a Double Taxation

Avoidance Agreement (DTAA) is also crucial. By signing the DTAA, you can avoid paying taxes on the same income twice: once in India and once abroad.
Ensure you stay updated on TDS rates and know the documentation such as Form 15CA/15CB required while remitting funds from NRO Account. 

2. Send and Receive Money Securely

Transferring funds between India and abroad is a common need for NRIs. You can receive money in India through a wire transfer, digital remittance services, or international bank transfers directly into your NRI account.

Before transferring money from India to countries such as the US, UK or other countries, ensure your account is compliant with both Indian and the destination country foreign exchange regulations.  NRO account holders will require to comply with RBI norms for outward remittances. 

3. Consider Investment Options in India

NRIs can choose from a variety of investment options in India. These include:
•    Fixed Deposits: NRE Fixed Deposit accounts and FCNR deposits are tax exempted and repatriable in India and hence are most appropriate when you are investing in risk-free instruments.
•    Mutual Funds: NRIs can also consider investment in mutual fund schemes of India. As an investor, it is advisable to keep in mind restrictions by nations owing to FATCA regulations.
•    Equity Funds: Portfolio Investment Scheme (PIS) provides the facility to non-resident Indians to invest in India's shares.
•    Real estate: NRIs can buy and invest in residential as well as commercial real estate properties in India permissible as per FEMA guidelines.
Ensure that you finish your KYC formalities as NRI investor and are aware of the repatriation guidelines, lock-in period, and tax implications before investing.
4. Safeguard Your Finances
While managing your finances abroad while working and living there, it's important to follow some best practices:
•    Maintain an emergency fund in India for unforeseen expenses like healthcare or upkeep of properties.
•    Use an NRE savings account or an FCNR deposit to have on-hand and repatriable funds.
•    Assign Power of Attorney (PoA) to handle financial matters in your name, like banking, investments, or legal documents. The PoA must be registered and notarised in India for legal validity.
•    Ensure FEMA and tax compliance by keeping track of residency status, filing returns, and keeping track of rule changes.

Conclusion
Managing your finances in India as an NRI doesn't have to be complicated. From selecting the right type of NRI savings account, planning your investments, and compliance, you can make your money work for you in India and abroad.

Keep yourself informed about the regulations. Your finances in India can take care of your lifestyle, commitments, and long-term objectives without a hiccup.