Four Financial Changes NRIs Must Make After Returning to India

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NRIs enjoy certain financial privileges that are not available to resident Indian citizens. For example, the returns earned from investments are not taxable in India. But, when you return to India, you must make certain financial changes. Read on to know more about it. 


Amid the COVID-19 crisis prevailing worldwide, several non-resident Indians living abroad have already returned or are considering returning to their motherland for safety concerns. But, remember, returning to India may not be easy. Apart from the lifestyle changes, you must deal with the financial changes. Here are a few important financial changes you must make. 

Changes In The Taxation

As an NRI, you are entitled to get certain tax benefits, which do not apply to resident Indians. For example, the income earned from overseas is not taxable in India. But, when you return to India for good, you lose the NRI status, and the taxation will vary based on the residential status. 

NRI returning to India are categorised as – Resident and Ordinary Resident (ROR) and Resident but Not Ordinarily Resident (RNOR). An individual is classified as ROR if one stays in India more than 182 days in a financial year or has stayed more 365 days or more in the previous four financial years. 

An individual enjoys RNOR status if they retain their NRI status in nine out of the previous ten financial years or stays in India for less than 729 days in the seven financial years preceding the current year. 

If you are categorised as ROR, then the income earned from foreign sources is taxable in India, and it must be reported under the relevant heads while filing the income tax returns. If you qualify as RNOR, the income earned in a foreign country is exempted from tax, unless it is received in India. 

Changes in banking

After moving overseas and getting the NRI status, you may have converted your resident Indian bank account into an NRO or NRI account. These accounts make it easier for you to manage the funds earned in India and abroad. 

When you return to India and decide to stay here, you must convert your NRE or NRE account to an ordinary savings account within a couple of months of arrival. Failing to convert the account will be considered a violation of FEMA (Foreign Exchange Management Act) rules, and you may have to pay a hefty fine. 

If you hold FCNR (Foreign Currency Non-Resident) deposits, you can continue to keep the same until maturity but at a revised interest rate, as applicable to a resident Indian citizen. After the FCNR deposits mature, you can convert it into a Rupee deposit account or a resident foreign currency account. 

Changes in Insurance

The insurance policy you may have purchased overseas will not provide coverage when you return to India. So, if you plan to return to India, you must surrender the policy abroad and reassess your life and health insurance needs in India. 

Several experts recommend buying a family floater health insurance plan to cover all the family members under a single policy. For life insurance, you can consider buying a term plan as it provides a high sum assured at an affordable premium. 

Changes in Investments

If you are planning to return to India permanently, it is advisable to liquidate your assets abroad. For instance, if you own a property overseas, you may think of giving it on rent. But, remember managing the property remotely can be difficult. So, it’s better to sell it off. Also, if you hold assets like 401K, a retirement savings product offered by employers in the US, it can be difficult to liquidate it as it may have cost implications and a lock-in period. Withdrawing such investments prematurely may attract a penalty as well as tax on the amount withdrawn. 

Also, suppose you are an existing investor in mutual funds in India, upon returning to India. In that case, you must inform the fund house about the change in your residential status and also link the investment account to an ordinary resident Indian bank account.