Financial Planning for NRIs Returning to India: What’s Next?

Coming back to India after spending years abroad can be an Overwhelming and emotional experience. Planning surprise visits and gifts for your dear ones is fun, but financial planning is just as important for a smooth move.

No need to worry—help is here! In this blog, we will guide you through the steps required to financially prepare to return to India and make your transition smooth.

Updating your bank account status

Funds are needed when you are on shift; it might be for exploring the city or giving treats to your close ones. For that, converting your account status from NRE/NRO and FCNR account to resident savings account is mandatory. If you want to manage your foreign currency earnings in India, then you can opt for an RFC account, and there will be no risk of exchange rate fluctuation, unlike NRE/NRO account. It is advised that before coming back to India, you close all of your accounts in foreign countries that are not in use. Also, keep in mind to change your residential status for your bank accounts within 30 days of return according to RBI guidelines to avoid any future legal issues.

Tax Implications for NRIs

Tax is not only a duty but an obligation. Yet, by proper planning and strategy, you can maximize your tax outgo and improve financial effectiveness. You may be an NRI or an Indian resident, but tax compliance is necessary.

For those who are categorized as RNOR (Resident but Not Ordinarily Resident), tax relief is available on foreign income for a maximum of three years. As an NRI, interest on NRE and FCNR accounts is exempt from tax in India, whereas NRO accounts are taxed. When you return to India, if you have a foreign currency account (RFC account), the interest on it is taxable in India.

Also, knowledge of the Double Taxation Avoidance Agreement (DTAA) is important for NRIs earning foreign income. DTAA prevents double taxation by providing tax credits or exemptions so that you do not have to pay tax on the same income in both nations.

Investment Planning In India

Returning to India can redefine your financial objectives and investment plans. It is essential to coordinate your investments with your financial requirements after relocation.

On your foreign investments, you have only two options: hold them or sell them. If you do choose to retain your foreign incomes, holding an RFC (Resident Foreign Currency) account may be helpful in managing funds without exposing yourself to exchange rate fluctuations. However, if you happen to sell them, watch for fluctuations in the currency and coordinate the transactions timely.

A well-established asset management company like Prime Wealth, can make convenient shifting of investment to India possible and hence ease financial transfer seamlessly.

Securing life and health insurance

While moving back to India, environmental changes could affect your well-being. At that time, it would be essential to have a health insurance plan in India since your foreign health insurance coverage would no longer hold. While in this transit phase, quite a few of your financial services will also remain in transit, making local healthcare coverage all the more necessary.

When it comes to insurance in life, making sure you have an active and current policy matters just as much. This guarantees that in the event of any unexpected occurrence, your loved ones are protected financially and can handle any duties without worry.

Having proper insurance coverage and paying premiums regularly offers financial security for you and your loved ones, including health issues and unexpected situations.

Regulatory requirements and compliance

Paperwork and compliance are not the most thrilling aspects of the financial experience, but they’re the foundation of a hassle-free financial ride-do it right, and remain stress-free. The moment you land in India, renew your PAN card, Aadhar Card, and KYC records with the banks and financial institutions. Foreign assets and bank accounts need to be disclosed in accordance with Indian tax laws. Those who intend to open a business or pursue employment in India need to look out for required legal and financial compliances. Being compliant with Indian laws avoids future legal and financial issues.

Conclusion

Returning to India is a significant transition, and careful financial planning can make the process seamless. From updating bank accounts and understanding tax implications to securing investments and insurance, every step plays a vital role in ensuring a financially secure future. By following these essential financial steps, NRIs can enjoy a hassle-free return and focus on building a fulfilling life in India.

FAQs

1. Can I continue using my NRE/NRO account after returning to India?

   Ans- No, you need to convert your NRE/NRO accounts into a resident savings account or an RFC account if you wish to hold foreign currency.

2. How long can I maintain RNOR status after returning to India?

   Ans- RNOR status can be maintained for up to three years, allowing certain tax exemptions on foreign income.

3. Do I need to pay tax on my foreign income after returning to India?

   Ans- If you qualify as an RNOR, foreign income is not taxable. However, once you become a resident, global income is subject to Indian taxes.

4. Should I sell my foreign property before returning to India?

   Ans- It depends on your financial goals. If you plan to keep earning rental income, check DTAA benefits. Otherwise, selling may simplify tax compliance.

5. What happens to my foreign investments when I return to India?

   Ans- You can retain them, liquidate, or transfer funds based on tax implications and financial goals. Consulting a financial advisor is recommended.

6. Can I open an RFC account, and what are its benefits?

   Ans- Yes, an RFC (Resident Foreign Currency) account lets you hold foreign currency in India, offering flexibility for future foreign expenses or investments.

7. How do I update my KYC details after returning to India?

   Ans- Visit your bank or financial institution with updated Aadhaar, PAN, and address proof to complete KYC formalities.

8. Should I buy health insurance in India immediately?

   Ans- Yes, buying a comprehensive health insurance policy before returning ensures coverage for medical emergencies.

9. How can I avoid double taxation on my foreign income?

   Ans- By utilizing DTAA (Double Taxation Avoidance Agreement) benefits, you can offset foreign taxes paid against Indian tax liabilities.

10. Can I transfer funds freely from my foreign accounts to India?

    Ans- Yes, but it’s advisable to check the tax implications and choose the right method, such as an NRO to NRE transfer, to optimize tax efficiency.

Disclaimer: The information provided here is for educational and informational purposes only and should not be construed as financial, legal, or tax advice. Consult with a qualified professional before making any investment decisions. We do not accept any liability for errors or omissions in this information nor any direct, indirect, or consequential losses arising from its use.