F1: NRI Returns To India – Changes To Expect

When NRIs move back to India, several changes occur in areas like taxation, financial assets, banking, and customs duty. Here are the key highlights:

Tax Status: NRIs have different tax statuses such as Ordinary Resident (ROR), Non-Resident (NR), or Not Ordinary Resident (NOR) depending on their stay in India during a financial year (April 1 to March 31).
- ROR Status: If an individual qualifies as an ROR, global income is taxable in India.
- NOR Status: For about 2 years, based on being an NR for 9 out of the last 10 years, the person will qualify as NOR, where only income generated from sources in India is taxed.
Filing Foreign Tax Returns: Whether the returned NRI needs to file foreign tax returns depends on the income received in that country and its tax rules. For ROR status, each income head like salaries, rental income, capital gains, and social security receipts needs to be evaluated for double taxation relief under DTAA.

NRIs returning to India can continue to hold their foreign assets, including bank accounts. These assets must be declared in their Indian Tax Returns.
Foreign bank accounts and brokerage accounts will be reported to the home country under FATCA (for USA) and CRS (for OECD countries like Australia, UK, Canada, Germany).

After becoming an Indian Resident, NRIs need to convert their NRE, NRO, and FCNR accounts to regular resident savings/deposit accounts.
- NRO Account: Converted back to a resident savings account.
- NRE and FCNR Accounts: Can be converted to Resident Foreign Currency (RFC) accounts.
RFC Accounts: Allow NRIs to retain foreign currency and remit it overseas later. These accounts can be in any convertible foreign currency and can be current, savings, or term deposit accounts. Interest earned is tax-free for RNOR status holders for 2 years after return.
RFC (Domestic) Accounts: Maintained by any resident wanting to acquire foreign exchange for future use, in four major currencies (USD, EURO, GBP, and Japanese Yen). These are non-interest-bearing accounts.

NRIs/PIOs who have stayed abroad for at least 2 years and are returning to India for an indefinite period can use the transfer of residency facility to take advantage of relaxed customs duties. Most personal and household articles can be imported duty-free, and other listed items can be imported at a concessional duty rate.

For further details, refer to the .