Finance changes NRIs need to make after returning to India.

 Many Indians decide to move abroad for better work opportunities and lifestyles. However, sometimes they have to return to their home country. As difficult as it is to move to another country, it is equally challenging to return. Along with lifestyle changes, NRIs returning to India also face a shift in their finances and it is best to be prepared.

If you are a Non-Resident Indian looking to move back to India, here are four significant changes you will have to make:

Taxation

As an NRI you enjoy certain tax breaks, but those are released once your status changes from NRI to resident Indian. NRIs returning to India fall under two categories - Resident and Ordinarily Resident (ROR) and Resident but Not Ordinarily Resident (RNOR). If an NRI stays in India for over 182 days in a particular financial year or more than 60 days in a financial year and 365 days in the previous 4 FYs, they are considered Ordinary Residents (ROR). NRIs who have managed to retain their NRI status for 9 out of 10 financial years before the current Financial Year or 729 days or less in the 7 Financial Years before the relevant Financial Year are considered Non-Ordinary Residents (RNOR).

“An individual qualifying as ROR is taxable on his worldwide income in India and is required to report all foreign assets in the India Income Tax Return (ITR). After a person becomes resident Indian, any income earned from foreign assets in the relevant FY needs to be reported in the ITR under the relevant head of income," said Sonu Iyer, Tax Partner, and People Advisory Services Leader, EY India. However, for RNOR’s the rules are different. “If the individual had limited past presence in India in the past 10 FYs, then he may qualify as an RNOR in India for the initial two-three years of returning to India depending on the number of days of past physical presence in India," said Iyer.

Banking

NRIs can’t hold regular bank accounts in India, however, they can have NRE Savings Accounts (Non-Resident External) or NRO Savings Accounts (Non-Resident Ordinary) to manage their income in India. But once their status changes back to Resident Indians, they are supposed to change these accounts back to Resident Indian accounts within a couple of months, or else it would be considered a violation under Foreign Exchange Management Act (FEMA).

NRIs holding FCNR Deposits can keep them until maturity. However, as soon as the deposits mature, NRIs are expected to convert them into Resident Rupee Deposit Accounts or Resident Foreign Currency Accounts.

Investment

NRIs returning to India are advised to liquidate all their foreign assets before returning, especially property. Some assets like 401k might be difficult to liquidate since they have a lock-in period. Hence, it is better to continue this asset rather than discontinuing it. However, one must remember that any income from foreign assets, whether property or 401k will be taxable in India once they become Resident Indians. Apart from this, if NRIs have mutual fund investments in India, they will have to inform the fund house about the change in their residential status. If they have stocks in India, they need to close their Portfolio Investment Scheme (PIS) Account and open a regular brokerage and Demat account to manage the same.

Insurance

Last but not the least, NRIs will have to discontinue their insurance from their foreign country of residence and buy a new one in India on arrival. It is recommended to buy health insurance as soon as one returns and also a term plan for life insurance.

Substantial changes in life are never easy and it is always good to have expert support and help. SBM Bank India can help NRIs in this endeavor and make this transition as smooth and effortless as possible through best-in-class banking services, privileges, expert assistance, and more.