Introduction
Investments in India are not limited to Indian residents. Rapid gentrification has pushed forward capital market liberalization and is encouraging several local and non-local resident Indians to invest (or) reinvest finances to support forward markets and capital appreciation. Hence, supporting the growth and usage of an NRI loan.
Everyday mistakes have a greater ability to recover from loss, however, finances involve big decisions that are both mentally and economically riskier. Therefore the applicant should know the risks before applying for larger capital investment and should be able to map out quick recoveries if he may fail to acknowledge gaps or inconsistencies in the light of unexpected events.
In this blog, we will discuss how an NRI loan works and NRIs can avoid common mistakes while applying for an NRI loan In India and benefit from real estate instead of derailing their perfectly laid out plans. This will not only help you to take a solid action program but will prod you hard enough to systematically follow through and maximize benefits.
Retaining Local Bank Accounts
When you have an existing bank account in India and have changed your residence and become an NRI, the resident bank account according to FEMA (Foreign Exchange Management Act) should be converted to NRO (Non-Resident Ordinary) Account. Any investments in mutual funds should be discussed with a registrar and be effectively updated addressing all the necessary documents (FATCA, PAN, KYC, etc).
If failed to do so, the NRI may be liable to hefty penalties or prosecution for the breach of registration requirements. Therefore the NRI should take measures to convert any existing trading accounts to PIS (Portfolio Investment Scheme) accounts and DEMAT to DEMAT NRO, so and so forth, accordingly. Likewise, an NRE (Non-Resident External) account can be used by NRIs independently or jointly with an NRI as a savings, term deposit, or current account to retain and manage funds in foreign currency.
Relying On Non-Professional Advice
It is a common practice to ask friends and family for advice when taking out a NRI loan or a loan of any sort when investing in a venture. But Uncle Bob or your friend Larry though sincere; can only give you advice wheeling their own experience. It is advisable to get professional and unbiased advice regardless of the size of the NRI loan procured. Financial experts are well equipped with knowledge and trends within and beyond the industry and have the means to deliver sound advice to support the smooth transfer of your assets.
To achieve your financial goals without faltering or conflicting with the law, it is wise to hire a certified professional versed in legal regulations in both countries to assist you through the entire process of the NRI loan seamlessly. If you contact a financial marketplace, like ours, Loanz360 will take care of all your capital requirements by appointing you with a dedicated relationship manager (ex-bankers with 50+ years of cumulative experience) to aid your demands of accessing an NRI loan through appropriate means and procedures.
Neglecting Tax Implications
TDS is a complicated subject and often without professional help NRIs will fall into a desolate situation wherein recovering the losses is highly exasperating. Therefore the NRI regardless of applying for an NRI loan or not should know his tax implications on everything from mutual funds to rental income to avoid ending up paying oppressive taxes. Also to avoid losses from mousetrap charges, NRIs should seek knowledge regarding DTAA (Double Tax Avoidance Agreement) that India has with several countries. Therefore, apart from knowing TDS rates and deductions, the NRI should file taxes religiously and document the ITR legally even if it is a nil tax return.
More so, since the NRI should switch between maintaining income or assets in multiple countries, this becomes a tedious task to keep and maintain track of credentials and records uniformly as he may be expected to pay due income or capital gains tax in both countries depending on the source and type of income or asset. This is another reason why you should have a professional advisor to work with both tax systems efficiently without you having to worry about legal disruptions or potential penalties.
Learn more about tax here.
Single-Minded Investment
In real estate, rural areas, fixed deposits, and several others, NRIs have the privilege to choose from a broad array of investment options increasingly in parallel with Indian residents. But is there that one option that is right or wrong?
Most NRIs assume that investing in real estate is the best option and they set in the course to avail of an NRI loan blindfoldedly without exploring divisions. In such cases, either they end up investing in something that does not appreciate over time or spending profits on taxes with a bad investment imposing a higher growth rate of inflation.
Therefore, anyone regardless of their residential situation should make a financial plan before setting forth to apply for an NRI loan. Consider planning your investment in support of your future goals. Take the help of a financial advisor to make a detailed estimate of your targets, goals, and expectations. This will allow you to make a sound investment without splurging money down the road with ambitious projects. Though real estate is a sound investment, consider weighing options on where to invest, your budget, your family expenses, profit and loss management plans, existing debentures, etc.
Overlooking Dual Citizenship
Though several countries allow dual citizenship, the Indian constitution DOES NOT allow dual citizenship. Once the former resident of India has obtained citizenship with their resident country, he will cease to be a resident of India with automatic loss of Indian citizenship. Thus the NRI individual should update his PAN, KYC, FATCA, and other necessary documents with his newly acquired citizenship. Though there are several cases where NRIs favor not updating their documents to avoid TDS, they will be liable to retribution or legal measures upon appraisals.
Moreover, even if he does not update his residency he will still be stipulated under FEMA and is expected to pay taxes due diligence. Simply put, any resident Indian who has foreign citizenship (OCI/PIO) will be liable to taxes upon possessing a taxable income or asset in India, at par with NRIs.
Final Word
Any hard-earned money should be managed and spent with care. Therefore appointing a financial expert to make a sound investment is advisory.
Loanz360 is a store for all-inclusive financial solutions, from management to protection of assets, we provide all financial services to our local and international customers alike.
If you are still not sure how to avail of an NRI loan, give us a call at Loanz360 and schedule a meeting with our representative, who will take you through the process of financing a NRI loan, along with comparing the market rates and finding the best option that fits your monthly budgets without breaking a sweat.
