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ICICI Ex-NRI: Converting Existing Investments to NRO - Your Advice?

Ramalingam

Ramalingam Kalirajan  |7922 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jan 16, 2025

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more
Shankar Question by Shankar on Dec 12, 2024Hindi
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hi i have exsisiitng investments in icici in savings account for shares and mutual funds if i convert this to Nro what will be the process any tax implications also cna i continue investing in the account as a savings account itself and open a nre account in other bank will it have any issues

Ans: When you convert your existing savings and investments into an NRO (Non-Resident Ordinary) account, there are a few key factors you need to understand. Let's break it down step by step.

1. What is an NRO Account?
An NRO account is meant for non-resident Indians (NRIs) to manage income earned in India.
This includes income from property, investments, dividends, and other sources within India.
You can operate this account from abroad, but it has specific rules for tax purposes.
2. Process for Converting Your Account to NRO
To convert your existing savings or investment account to an NRO, you will need to provide documents proving your NRI status.
A few common documents include your passport, visa, and Overseas Citizen of India (OCI) card.
Your bank will help you complete the conversion process and guide you on the necessary forms.
Once converted, your account will be subject to NRO account guidelines, which include specific tax implications.
3. Tax Implications of an NRO Account
Income in an NRO account is subject to Indian tax laws.
Interest income from the savings account, dividends, and capital gains are all taxable.
Tax deducted at source (TDS) will be applicable. TDS rates on interest can be as high as 30%, depending on the type of income.
If you earn interest or dividend income, it will be taxed in India.
Capital gains from the sale of investments like mutual funds or shares in an NRO account will also be subject to Indian taxes.
Short-term capital gains (STCG) on equity investments are taxed at 15%.
Long-term capital gains (LTCG) over Rs 1 lakh are taxed at 10% (with indexation benefits).
4. Can You Continue Investing in the NRO Account?
Yes, you can continue investing in your NRO account.
You can invest in Indian stocks, mutual funds, and other financial instruments.
However, you must ensure that all investments comply with RBI regulations for NRIs.
Investment in equity mutual funds, bonds, and other instruments will continue to be taxed according to Indian tax laws.
5. Opening an NRE Account in Another Bank
Yes, you can open an NRE (Non-Resident External) account with a different bank.
NRE accounts are for income earned outside of India and are tax-free in India.
You can freely transfer funds from your NRO account to your NRE account.
However, the funds transferred will have to follow the RBI guidelines, and tax implications could arise depending on the source of income.
6. Potential Issues When Converting to NRO
Tax Complications: You may face double taxation if there are cross-border taxation issues.
Repatriation Limitations: Funds in the NRO account can only be repatriated to your home country after tax payment.
Transfer Rules: When transferring funds to NRE accounts, ensure that the sources of income are in compliance with Indian regulations.
Repatriation to NRE Account: Only current income like interest, dividends, and rental income can be transferred to NRE accounts. Capital gains need to be settled in the NRO account.
7. Can You Continue Using Your Existing Savings Account for Investments?
If you convert your savings account to an NRO account, it can still be used for day-to-day transactions, such as receiving rental income or dividends.
However, your tax liability will be different for every type of income earned, so keep track of TDS deductions.
This NRO account can also be used for trading in shares and mutual funds.
8. Best Practices to Minimize Tax Implications
Always keep a record of taxes paid and TDS deductions to avoid any discrepancies later.
Understand the tax treaties between India and your country of residence, as it may offer benefits to reduce double taxation.
Consider seeking assistance from a Certified Financial Planner (CFP) for tax planning and strategy, as they can help optimize your investments and tax burden.
Final Insights
Converting your account to NRO is a necessary step when you become an NRI.
While you can continue investing, you will be subject to Indian tax laws on any income generated.
Opening an NRE account in another bank is possible and has its own set of advantages, especially with tax-free income.
Understanding the tax implications and RBI guidelines is crucial to managing your investments and repatriation of funds.
Proper planning with the help of a Certified Financial Planner will ensure you make informed investment decisions and manage your tax liability efficiently.
Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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I have invested in mutual funds through savings account in groww. Now the same account is converted to NRO account. Can I continue investigating from the same account? Account number is same and have invested in the same fund after converting to NRO. Should I continue investigating it? Is there anything I need to update about my NRI status?
Ans: Converting your savings account to a Non-Resident Ordinary (NRO) account can bring about several changes, especially when it comes to your investments in mutual funds. Here’s how to navigate your situation effectively.

Continuing Your Mutual Fund Investments
Since you have invested in mutual funds through your Groww account, you can continue investing from your NRO account. Here are some important points to consider:

Same Account Number: Since your account number remains the same, your investments in mutual funds through the Groww platform can continue. The transition to an NRO account does not automatically hinder your investment.

Fund Investment: As long as the mutual fund house allows investments from NRO accounts, you can keep investing in the same funds. However, ensure that the mutual fund you are investing in accepts funds from NRO accounts.

Updating Your NRI Status
When you convert to an NRO account, there are some updates and considerations you should be aware of:

Notify the Fund House: Inform the mutual fund house about your change in status to NRI. This is crucial for regulatory compliance and ensuring that your investments are correctly classified.

Tax Implications: NRI investments are subject to different tax treatments. Capital gains from mutual fund investments are taxed differently for NRIs, particularly with regards to Long-Term Capital Gains (LTCG) and Short-Term Capital Gains (STCG). You should familiarize yourself with these changes to manage your tax liability effectively.

KYC Compliance: Make sure your KYC (Know Your Customer) details are updated according to your NRI status. This may involve submitting new documents that reflect your NRI status, such as a valid passport, visa, and proof of residence abroad.

Why Professional Guidance is Essential
During transitions like converting to an NRO account, it’s often challenging to manage investments independently. Here’s why seeking professional help is advantageous:

Expertise in NRI Investments: A professional Mutual Fund Distributor (MFD) can guide you through the complexities of investing as an NRI. They can help you understand the implications of your status change on your investments.

Tailored Financial Advice: An MFD can provide personalized advice based on your financial goals, risk appetite, and investment horizon, ensuring that your portfolio aligns with your needs.

Assistance with Documentation: Managing the necessary paperwork during this transition can be overwhelming. A professional can help ensure that all required documents are submitted correctly and promptly.

Handholding Throughout the Process: Having an expert to assist you can ease your concerns and help you navigate the investment landscape confidently. They will be there to address any queries you may have and provide ongoing support.

Final Thoughts
You can continue investing from your NRO account using your existing Groww account, as long as you keep the mutual fund houses informed about your NRI status. It’s vital to update your KYC details and understand the tax implications of your investments.

However, managing investments as an NRI can be complex. Therefore, engaging a certified professional MFD is highly recommended. They can provide you with the necessary guidance and support as you navigate this transition.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

https://www.youtube.com/@HolisticInvestment

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I am 51 single, divorced and have one little sister who is 32. Recently I lost my job, and I am not in the mood to search for a new one. I am in the process of making arrangement to fulfill my monthly needs. I am holding the NPS which has a small corpus of 5 lacs in tier 1 and 45k in tier 2. Now I want to completely exit from the NPS. Now I must compulsorily accept the 20% withdrawal and 80% annuity. I have a few queries below. 1. Should I consider buying 100% annuity. 20% withdrawal does not make sense 2. Should I consider putting 1.5 lacs more to enhance the annuity (The corpus will become 7 lacs approx.). 3. Should I consider taking out the annuity on a yearly basis (Please explain Its pros and cons), since it offers more benefit. 4. Should I consider the Shriram life insurance. 5. Will it be safe to consider Shriram life insurance for life long future annuity. It offers the highest annuity. 6. Should I consider Annuity for Life with ROP - Subscriber will get annuity for lifetime and on death of the Subscriber, payment of annuity ceases & 100% of the purchase price will be returned to the nominee(s). The annual offer is 49,063.00 (7.01%) 7. Should I consider Annuity for Life without ROP - Subscriber will get annuity for lifetime and on death of the Subscriber, payment of annuity ceases, and no further amount will be payable. The annual offer is 58,112.00 (8.30%)
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Point wise answers to your queries as given below:

1. Yes.
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3. If you do monthly annuity the rate will be lower but you get monthly payouts. In yearly the rate will higher but only one shot payment per year so it depends on your preference.

4. Cannot comment on suitability of xyz firm.

5. Consider an insurer which has good capital adequacy, growing profitable business, preferably listed, reputation of the owner/group apart from decent annuity rates on offer.

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Please have adequate healthcare insurance cover.

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My simple advice to you would be to get back to some job while you can continue to ponder over your long term goals/passion/pursuits.
Sitting idle (with no funds) at home won't help & it is not going to do any good to your career/life plans.
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Say you earnestly wish to pursue higher studies than you need to get yourself these answers 1) Why you need a higher degree in first place ? 2) Will it help you to get job/career of your choice? 3) If yes, then shortlist some relevant good courses & start exploring admit process etc. 4) Meanwhile do account for funds that will help you to time your break from the job (savings, loans etc.)
Likewise ask yourself questions for each option you have in mind & be honest in responses, that will help you to zero on your real aspiration & then do the proper detailing/planning. This may entail some compromises in short term but will certainly pave your way to achieve long term goals.

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Ravi

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Dating, Relationships Expert - Answered on Feb 10, 2025

Asked by Anonymous - Feb 08, 2025
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Me and my girlfriend we both are in relationship from about last 2 years (almost). After such a long time I got to know that she had 2 relationships before me that too she didn't told I got to know it by third person she was sexually involved too (not intercourse but yes other things with one of them)... When I asked her that why you didn't told anything to me before she said she was scared that if she'll tell it to me so I'll leave her and she really did not wanted that... She was scared to loose me. And she was still in contact with that guy and when I asked her that why you were still in contact with him (it's been around 3 years they got separated) so she says that she is like that only... She can't deny anyone because of her soft hearted nature but she did not had any feelings for him. She also said that once she even went to meet him when he requested to meet and also on the same she claims that her soft hearted nature has done that she wasn't able to deny. I loved her too much but now all these things are hurting me like anything. (She is my first relationship before her i never had anyone)
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I understand that you are hurt and the complexities of the hearts might be difficult sometimes to grasp. The first reason for your sorrow, her past relationship, and the fact that she was physically intimate with them is not completely justifiable. Though I understand that you feel hurt because she did not disclose it to you, still it should not matter so much as to ruin your present relationship. And whether she will open up about such sensitive details is actually up to her. It has nothing to do with how much she loves you or trusts you. Please understand that.

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DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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