"Become an NRI? 6 Essential Things Every NRI Must Do Right Away"

"Become an NRI? 6 Essential Things Every NRI Must Do Right Away"

Just became an NRI, or planning to move abroad soon? A handful of quiet compliance gaps — the kind that don't show up until a notice arrives, a transaction gets stuck, or an OTP never lands — catch most NRIs off guard. Here are six things worth checking today.

1. Your Bank Account and Demat Account

The moment your residential status changes, your regular savings account needs to be converted to an NRO (Non-Resident Ordinary) account. NRO holds your India-earned income — rent, interest, dividends. If you want to bring foreign earnings into India — your overseas salary or pension — that goes into a separate NRE (Non-Resident External) account, which is tax-free and freely repatriable.

Continuing to run a resident savings account after becoming an NRI is a FEMA violation, with a penalty that can go up to three times the amount involved, or 2 lakh — whichever is higher. The good news: RBI's FEMA Compounding facility lets you voluntarily approach RBI through a CA, explain the situation, and settle the matter with a manageable penalty — being proactive is always better than waiting for a notice to arrive. Your Fixed Deposits and RDs need the same conversion — and note that TDS on a resident FD is 10%, while on an NRI FD it's 31.2%. If your bank is still deducting the resident rate, that needs fixing too.

Your Demat account deserves equal urgency. As an NRI, you cannot legally trade on your existing resident Demat account — every single trade becomes a separate FEMA violation, not a one-time issue. To trade legally, you need a new NRI Demat account with a SEBI-registered broker, plus a PIS (Portfolio Investment Scheme) account, which routes your trades through your NRO account. For mutual funds, update your KYC status to NRI with every AMC you invest with — and if you're in the US or Canada, check with your AMC directly, since many Indian mutual fund houses don't accept investments from US/Canada NRIs due to FATCA compliance.

2. Your Income Tax Residential Status                 

Your PAN doesn't change — what changes is your residential status, both on the income tax portal and in your ITR each year. As a general rule, spending fewer than 182 days in India in a financial year makes you a Non-Resident for tax purposes, meaning only your India-sourced income (rent, FD interest, capital gains from Indian assets) is taxable; foreign salary isn't.

Two common mistakes here matter a great deal. First, Form 15G and 15H are for resident Indians only — they declare that your income is below the taxable limit, so no TDS should be deducted. Submitting these as an NRI is a false declaration under the Income Tax Act. If you're still submitting them, stop immediately and ask your bank to apply the correct NRI TDS rates. Second, check your last two years of ITR filings — if you declared Resident status while you were actually an NRI, a Revised ITR under Section 139(5) can correct this, but the window closes on 31 December of the relevant assessment year.

3. File Your ITR — Even With No India Income

This is the one most NRIs skip, often incorrectly. Even with no rent, interest, or salary from India, there are good reasons to log into the IT portal and check your record — or file a return. Your PAN stays active and is linked to bank accounts, property transactions, and high-value dealings; if the tax department raises a query on any of these and there's no ITR on file, you're in a much weaker position to respond. If you have even 1 of income from an NRO account, filing is a legal requirement — NRO interest is taxable at 30% plus surcharge, and TDS being deducted doesn't remove your obligation to file. And if you're planning to return to India, buy property, or make large investments down the line, a clean multi-year ITR record makes every future transaction smoother.

The applicable form is ITR-2, filed entirely online through incometax.gov.in — no physical presence in India is needed. It's also worth showing your foreign income on the return; you won't be taxed on it as an NRI, but it keeps your financial record transparent and protects you from future scrutiny.

4. Set Up a Power of Attorney                       

A common NRI frustration is having to fly back to India for every small matter — a bank requirement, a property transaction, a court appearance. A Power of Attorney (POA) solves this by legally authorising a trusted person — a parent, spouse, sibling, or close friend — to act on your behalf in India: signing documents, handling bank transactions, appearing before authorities, or managing property.

There are two types: a Specific POA, limited to defined tasks (like selling one property or operating one account) and generally safer, or a General POA, which grants broad authority and should only go to someone you fully trust. The process: get it drafted by a CA or lawyer (avoid internet templates), sign and notarise it in your country of residence, obtain Apostille certification to make it valid for use in India, send the original to India for registration at the Sub-Registrar Office, and inform all relevant banks and institutions of the POA holder's authority. It's a one-time effort that removes years of recurring hassle.

5. Fix Your Aadhaar and Indian Mobile Number

A familiar scenario: you try to file your ITR, the portal asks for an OTP, and it goes nowhere — because TRAI rules mean any Indian mobile number inactive for 90+ days gets recycled to another user, and that number is likely linked to your Aadhaar, IT portal, bank, and Demat account. The fix is straightforward: activate an international roaming plan on your Indian number (Airtel and Jio both offer plans from roughly ?500/month) and keep a minimal monthly recharge going to keep the number alive. Also update your Aadhaar address with your foreign address via the UIDAI portal using your passport, and add your email as an OTP backup where possible. If your number is already deactivated, get a new Indian SIM and update it everywhere — IT portal, Aadhaar, bank, and Demat, in that order.

6. Claim DTAA Benefits — and Consult Your CA Before Big Moves

India has Double Taxation Avoidance Agreements (DTAA) with 90+ countries, meaning you shouldn't pay tax twice on the same income. But this benefit isn't automatic — you have to actively claim it, and most NRIs simply accept whatever TDS the bank deducts as final, often overpaying. To claim it: obtain a Tax Residency Certificate from your home country's tax authority, file Form 10F with the Indian tax department, and claim the lower rate or foreign tax credit in your ITR.

One final point worth acting on early: if you're planning to return to India, consult your CA before you come back, not after. Your residential status changes the moment you cross 182 days in India, along with your tax and FEMA obligations — and selling property, moving large sums, or closing foreign accounts at the wrong time can create a tax difference running into lakhs. The same applies to any major financial decision as an NRI. Sequence and timing matter — plan first, act second.

Disclaimer: This article is for general educational purposes only and does not constitute personalised legal or financial advice. Tax laws change, and your situation may differ from what's discussed here. Please consult a qualified Chartered Accountant for guidance specific to your case.

CA Dhiraj Ostwal & Associates — NRI Services Desk FC Road, Shivajinagar, Pune – 411004  +91-70200 45454 |  www.cadhirajostwal.com |  dhiraj@cadhirajostwal.com