As an NRI returning to India, please be prepared to plan. Ensure that your personal finances are safe. Since you are planning to settle in India, learning everything you can about the current tax laws is important.
Things you should know about taxation
Bank Accounts
NRIs can open bank accounts in India. They can invest and acquire assets, as well. The accounts that most NRIs choose to go for are either a Non-Resident External (NRE) account or a Foreign Currency Non-Resident (FCNR) account.
The accounts work well as long as you are staying in a foreign land. When you are planning to settle in India, you will have to re-designate all your accounts to RFC accounts.
RFC stands for “Resident Foreign Currency”. Once you are in India permanently, your residency status will change. So, if you have previously invested in shares or hold partnerships in other companies, you must inform the companies about your present residential status.
Learn every little detail about your status of residency
Learn everything you can about two important governing acts. They are:
- ITA (Income Tax Act)
- FEMA (Foreign Exchange Management Act)
Both ITA and FEMA exercise absolute control on the taxes levied on NRIs returning to the country. According to the current norms of the ITA, taxes and residency status of an NRI depend on the total number of days you are spending in India.
You will either be an RNOR (Resident but Not Ordinarily Resident) or a ROR (Resident and Ordinarily Resident). Depending on the status of your residency, taxes will be charged.
Taxes on your foreign assets
For a returning NRI with an RNOR status of residency, there’s a perk: You can hold off on paying taxes on your foreign income for as long as three years. Even your existing NRE and FCNR accounts are tax-free. That’s not all—you are also exempt from paying wealth tax for up to 7 years.
In compliance with the regulations of FEMA, NRIs returning to India can invest, acquire, hold, and even transfer their assets from a foreign land. There’s a catch though. Please read this carefully:
“The law applies only when the assets were bought or acquired when you were living outside the country (India) as an NRI.”
If you have accounts like the RFC (Resident Foreign Currency) or the “Exchange Earners Foreign Currency” account, you can make transactions without any hassle.
Residency Status – FAQs
Who gets a “ROR” residency status?
ROR stands for “Resident and Ordinarily Resident”. You will be granted ROR status if you have stayed in the country for a duration of 182 days or more in the previous financial year.
There is another alternative: Stay in India for 60 days or more in the current financial year. Then, spend 365 days or more in India throughout the upcoming four fiscal years. You will be granted ROR residency status.
Can you get a “Resident but Not Ordinarily Resident” status?
Yes, you can.
According to the income tax laws of India, if you have been a non-resident for 9 out of 10 years, including the current FY, an RNOR status awaits.
If you have been living in the country for 729 days or fewer within a span of 7 years leading up to the present financial year, you will be recognized as an RNOR. This status will remain unchanged for the subsequent 2 years.
Sit down and organize your financial plans. Playing along the lines of strategies like an integrated investment can be worthy. Go ahead and make your homecoming a pleasant experience. Safeguard your money and investments by staying up-to-date about the government norms under ITA and FEMA.
