Thinking of Moving back to India for permanent settlement, Here is a checklist of points to be noted for returning NRI

Can a Returning NRI hold Overseas Assets?

Yes, Returning NRIs may hold, own, transfer, or invest in foreign currency, foreign security, or any immovable property situated outside India if such assets were acquired, held, or owned by them when they were a non-resident or were inherited from a non-resident person.

Is RBI permission required by Returning NRIs to retain their overseas assets after their return to India?

No

What shall be the impact on Indian Assets?

1. Non-Resident Ordinary (NRO) A/c - Redesignate to Resident savings account

2. Foreign Currency Non-Resident (FCNR) A/c - Hold upto maturity; Upon maturity should be converted into Rupee Account or RFC a/c.

3. Non-Resident External (NRE) A/c - Re-designate to Resident a/c or transfer balance to RFC a/c

4. Shares and Securities - Returning NRI is required to inform the Depository/ Companies about a change of his/her residential status from non-resident to resident.

What is a RFC a/c and who can open it?

RFC a/c is known as Resident Foreign Currency a/c and a person resident in India including Returning NRIs may open, hold, and maintain such an account with an AD Bank in India. Funds held in RFC a/c are fully repatriable and denominated in forex.

Is a Non-Resident Indian required to inform anyone when he returns to India permanently?

Upon return to India for good, Returning NRI ought to inform the following persons about the change in their residential status:
i. AD Bank with whom they hold banking accounts
ii. Depository participants with whom they hold DEMAT accounts
iii. Companies where NRIs are Shareholders / Debenture holders and firms/LLPs where they are partners

Whether a Returning NRI is required to inform Government Authorities about his change in residential status and overseas assets that he holds?

Returning NRIs are not required to report about their change in residential status to RBI. However, they are required to mention his revised status while filing his return of income with the Income Tax Department.

Further, Returning NRIs upon becoming ROR as per The Act are required to report their Overseas Assets in their ROI to be filed in India annually in the Foreign Asset (FA) Schedule. However, they are not required to report their overseas assets to RBI.

What shall be the tax implications on the income earned by a Returning NRI as per The Act?

The scope of taxable income for a Financial Year (FY) would depend upon the Residential Status (RS) of the Returning NRI under The Act. The RS depends on the physical presence of the Returning NRIs in India during the FY and prior 10 FYs.

Accordingly, the taxability of income earned by Returning NRI shall be as under:

• if his/her RS is a Non-Resident in the year of return to India, then income earned outside India shall not be taxable in India in that year. 

• if his/her RS is as an RNOR then income earned outside India shall not be taxable in India as long as his RNOR status is achieved in the year of return and later years by restricting several days stay in India (Generally one can achieve RNOR status for two years after the year of return upto FY 2019-20. Further, as per the changes proposed in the Budget 2020, one may achieve RNOR for a period of three years after the year of return from FY 2020-21 onwards if some days of stay are planned carefully). 

• if his/her RS is as ROR in the year of return to India then income earned in India and outside India shall be taxable in India the year of return.

Returning NRI should carefully plan their stay in India in the year of return and subsequent years to take the benefit of Non-Resident/ RNOR status and protect the exposure to tax in India of the income outside India.

What is the best time for Returning NRI to move to India for good?

A Returning NRI should come back on or after February 1 (or February 2 in case of a leap year) of an FY to ensure Non-Resident status in the year of return. However, if the stay in India in the prior 4 previous FYs does not exceed 365 days then one may return after 2nd October (or October 3rd in case of a leap year).

What shall be the tax treatment of interest earned on NRO a/c and NRE a/c held by Returning NRI upon his/her return to India?

• Interest income on NRO a/c / term deposits in NRO a/c –
A Returning NRIs, upon return to India for good, will have to re-designate such NRO account to resident rupee account and interest income earned on such rupee a/c shall be taxable.

• Interest income on NRE A/c/ term deposits in NRE A/c-
A Returning NRI, upon return to India for good, will have to either re-designate such NRE account to a resident rupee account or transfer the balance to RFC a/c.

The interest income from NRE A/c is exempt in the hands of a person resident outside India as per FEMA. As the Returning NRI (person who has come to India for good) will no longer be a person resident outside India as per FEMA, accordingly interest earned on such re-designated rupee a/c will be taxable from the year of return. However, interest earned on RFC A/c deposits (approved by RBI) is exempt from taxes till the time the Returning NRI qualifies as RNOR as per The Act. Returning NRIs upon becoming ROR as per The Act, the interest income earned on RFC A/c shall be taxable in India subject to the provisions of Chapter XII.

What is the tax treatment of the interest on FCNR deposit held by Returning NRI on their return to India?

Interest earned on FCNR deposit is exempt from tax in the hands of Returning NRI till the time the Returning NRI is NR or RNOR as per The Act. Returning NRI upon becoming ROR, it shall be at the discretion of Returning NRIs to avail the benefits of concessional rate of tax on meeting all the prescribed conditions.

Is Income from assets held outside India taxable for a Returning India?

Income earned from assets held outside India by a Returning NRI will not be taxable till his residential status is RNOR under the IT Act.

What are permissible transactions in RFC a/c?

1. Foreign exchange received as pension/superannuation / other monetary benefits from the employer outside India
2. Foreign exchange received on sale of overseas assets/gift or inheritance/proceeds of life insurance policy and repatriated to India
3. Balances in NRE/ FCNR (B) account on change in residential status from Non-Resident to Resident
4. Foreign exchange acquired before 8th July 1947 or any income arising on it which is held outside India with RBI permission
5. However there is no restriction on the utilisation of credits in/outside India.

What is tax treatment of interest on RFC a/c?

Interest on RFC a/c will be exempt from tax as long as the Returning NRIs residential status under The Act is “RNOR”

What are the benefits of RFC accounts?

The benefits of RFC accounts are:

· Returning NRI may safely park their foreign currency funds on returning to India and such funds (including interest) shall be freely repatriable.

· In case there is a change in your RS status to Non Resident Indian, the funds parked in the RFC account can be transferred to the NRE/FCNR account.

Can the benefit of concessional tax treatment under chapter XIIA of the Act comprising sections 115C to 115L be continued after the Resident returns to India?

Non-resident Indians are taxed at a concessional rate on certain specified assets subject to specified conditions. Returning NRI may continue to get the benefit of such concessional tax rate till the transfer/conversion (otherwise than by transfer) into the money of such.

Is any additional compliance required by Returning NRI on their return to India?

•Resident Indians are mandatorily required to quote the Aadhar Number/ Enrolment ID of Aadhar in ROI in India and hence Returning NRI must obtain the same before the due date for filing the ROI.

•Asset Liability (AL) is a Schedule of the ROI that is required to be mandatorily filled by Individuals and HUFs if their total income exceeds Rs. 50,00,000/- in an FY. The said Schedule requires reporting of specified Indian Assets and corresponding Liabilities at the end of the FY. Thus, Returning NRI will need to comply with such reporting requirements if their income exceeds Rs. 50,00,000/- in an FY.

Should foreign coins be surrendered to AD Bank on return from abroad?

The residents can hold foreign coins without any limit.