A host of reasons might make NRIs return to India, their country of origin. It’s a move that brings a mix of excitement and apprehension. You would be treading back into familiar waters, but there’s still a nagging feeling of uncertainty. Hence, there are certain tips that you need to keep in mind as an NRI returning to India.
Status of Your Residency
You would be considered a “Resident Not Ordinarily Resident” (RNOR) in a year if:
- You have been an NRI for 9 out of the preceding 10 financial years
- You have lived in India for 729 days or fewer during the 7 financial years preceding the current financial year
You can maintain your RNOR status for 2 years after your return to India. Thereafter, you will become a Resident Ordinarily Resident (ROR).
What would be your tax liabilities?
As an NRI or RNOR, your global income won’t be taxable in India. Your FCNR and NRE accounts also won’t draw tax liabilities during this phase. The assets and money that you would bring to India would be exempt from wealth tax for up to 7 assessment years.
After the RNOR phase, you would need to designate your non-resident bank accounts as resident accounts. Until maturity, the FCNR accounts may be continued in their existing forms. Thereafter, you would need to convert them into Resident Foreign Currency (RFC) accounts.
As per the Foreign Exchange Management Act (FEMA) Rules, NRIs returning to India can own, invest, or transfer their assets that are located outside India. However, you can do this only for assets that you acquired while you were outside India.
FEMA also has provisions whereby you can conduct transactions and earn foreign income through an Exchange Earners Foreign Currency Account (EEFCA) and Resident Foreign Currency (RFC) accounts.
Insurance Policy Status
The insurance policy that you had purchased in a foreign country might not cover you in India. So, upon your return, assess your risk factors and buy insurance policies for yourself and your family accordingly.
After the Expiry of your RNOR Status
Once you move out of your RNOR status, you would be designated as an Ordinarily Resident. Then, your global income will attract tax liabilities in India. However, if the country you had been staying in has the Double Taxation Avoidance Agreement (DTAA) relationship with India, then you have an advantage. You won’t need to pay tax again in India.
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