Are you an NRI who is planning to return back to India for good? Are you a professional who has been working abroad and now is being sent on a long-term assignment to India? If yes, I am sure you have many things to do.
You might be busy winding up your work, winding up your household, arranging the logistics of travel for you and your family and transport of personal belongings. An important aspect that needs some well-thought plan of action is your financial plan.
This post is aimed at enhancing the knowledge base of NRI’s for ensuring their happy return to India.
NRI Moving Back To India
Here are five key points to remember and take action on when you, an NRI are going to be a Resident Indian –
Manage Bank Accounts –
As an NRI, you might have NRE, NRO and FCNR accounts. The NRO savings accounts have to be converted to resident savings accounts. Fixed deposits in FCNR and NRE accounts can remain the same until maturity. They can be changed to Resident Foreign Currency (RFC) accounts after maturity. Savings accounts can also be converted to RFC accounts when you have the RNOR (Resident but not Ordinarily Resident) status. Interest received in these accounts are exempt from tax. They have better conversion rates and can be used for transacting within India and abroad.
Demat Accounts –
You cannot operate the NRI Demat account that you opened when you were an NRI. You will have to open a resident demat account and transfer all your current investments to it.
Tax Implications –
You need to have a look at taxation rules in India before moving back. When you are an NRI and return to India, you first become an RNOR (Resident but not Ordinarily Resident). You can be an RNOR for a maximum of three years based on certain conditions of your stay abroad. As an RNOR, you are exempt from tax for the following incomes –
- Interest on FCNR accounts
- Interest and dividend received on investments abroad
- Capital gains on sale of assets abroad
- Rental income
Once you become a Resident Indian, the income that you earn abroad will also become taxable in India. Of course the DTAA protects you from getting doubly taxed.
Overseas Assets –
You might have acquired assets such as property, stock or bonds overseas when you stayed there. If you sell these assets and receive the sale proceeds outside India when you are an NRI or RNOR, you do not have to pay any taxes in India. The amount can be received in an account abroad and remitted to India. You will not be liable to pay tax. Check – NRE FD after return to India
As an NRI returning to India, you can also continue to hold your foreign earnings, foreign securities and immovable property outside India if it was acquired when you were a resident outside India. The income from such investments can also be retained outside India.
Financial Planning –
It is important to tweak your financial plan based on your residential status. The financial plan must cater to your short-term goals, long-term goals, and current financial status.
You might have got a lump sum money after your work stint abroad. It has to be invested wisely. You might have to buy a house for living in India. It has to be managed properly.
You have to take the following steps:
- Ensure you and your family have health insurance. If you are working in India, your employer might provide for you. If not, you should take care of it as medical expenses are quite high and a serious issue can upset your finances.
- If you have dependents, you should have a term plan in India so that your family is taken care of from a financial perspective.
- You should modify the budget to suit your lifestyle in India. The income and expenses will be very different. If you are going to retire in India, it is more important to have a conservative budget and stick to it so that your savings do not vanish quickly.
- It is not easy to manage taxes, investments and financial planning on your own when you return to India after a long stint abroad. You have many things apart from your financial plan in your mind. Moreover, things like taxes and investments would be very different from what they were when you were in India long back. It might be better to consult a professional financial planner to manage your financial plan.
Moving back to India is a huge step. You will have to think of different aspects – where you want to live, children’s life and their education, your married life, the status of parents (are they dependent on you, their health), lifestyle, work and financial goals. You have to think through all of them carefully and plan much ahead before you actually move back. All the best!
If you have any questions or suggestions on moving back to India feel free to add in the comment section.