Financial steps for NRI students?

Students take a lot of precaution when it comes to packing, arranging travel related documents etc, when planning for their studies abroad.

Students take a lot of precaution when it comes to packing, arranging travel related documents etc., when planning for their studies abroad. But, did you know that you have to plan for your finances to save tax and also plan for compliance with the law.

Here are a few things that you should remember if you are already a NRI student or are likely to achieve the status.

NRI students must close domestic savings accounts

The tax deducted at source in a domestic savings account is far lesser than a NRO Savings accounts. Hence, many NRIs continue to maintain domestic savings accounts. Remember, if you have achieved a NRI status and still maintain a domestic savings account, it is illegal.

Remember it makes sense to keep NRE deposits and not NRO deposits

At times as a student, you may have earned a stipend or income by working after college hours, remember it makes sense to repatriate and open a NRE fixed deposit account. NRE and NRO Fixed Deposits offer similar interest rates, but interest income on NRE Deposits are tax free, while interest on NRO Deposits are taxable.

Do not forget DTAA certificate

If the country of your residence has signed an agreement with India on double taxation avoidance agreement, then you would have to pay lesser TDS in India. For example, if you produce a DTAA letter in the desired format and submit it to your bank, they would cut TDS on NRO Fixed Dat 10%, rather then 30%. It's possible that as a student you are also working in the country of your residence and are already paying tax there. The DTAA letter specifies that your income is already being taxed in the country of your residence and should not be taxed again in India.

Tax free income categories

When a Indian student becomes a NRI, all the forex income that he has earned by way stipend or assignments, etc., is tax-free in India.

Can continue to keep existing PPF accounts open

Students can continue to keep existing PPF accounts open and can contribute from the NRE and NRO accounts only till maturity. Remember, it is illegal for existing NRIs to open fresh PPF accounts.

Second joint holder can be resident Indian in a NRE/NRO account

If your parents or spouse is the second joint holder and is a resident Indian, it is permitted. However, the account will be designated as a NRO account and higher TDS would apply.

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