After building a successful career in a foreign country, you decide that now is the right time to get back to your motherland. But it takes a lot of preparation and planning for the NRIs to plan their return to India, especially when they are planning to return for good.

One of the most important considerations before making a move is that of taxation. As you are planning to settle in India, it is very important to know about the tax laws that would apply to you. Some of the most important ones are as follows-

1. Residency Status

Foreign investment and taxation of NRIs returning to India are governed by the ITA (Income Tax Act) and FEMA (Foreign Exchange Management Act). Under ITA, the residency status and taxation depend on the number of days an NRI spends in India.

Based on this, it is decided whether an NRI is an RNOR (Resident but Not Ordinarily Resident) or ROR (Resident and Ordinarily Resident) for the taxation purpose. On the other hand, FEMA focuses on the intent of the NRI. If an NRI is returning to India and plans to settle here, FEMA treats him/her as a resident Indian.

2. Tax Treatment of Foreign Assets

Under ITA, NRIs settling in India are allowed to save taxes for up to 3 years on their global income if they have RNOR status. Even the FCNR and NRE accounts of such RNORs are tax-free. The assets and money brought to India by such NRIs are exempt from any wealth tax for up to 7 assessment years.

Under FEMA, NRIs who return to India can own, hold, invest, or transfer their assets not located in India. But this is only applicable if the assets were acquired when the NRI was outside India. FEMA also allows NRIs to make transactions and even earn foreign income through EEFCA (Exchange Earners Foreign Currency Account) and RFC (Resident Foreign Currency) accounts.

3. NRI Bank Accounts

When an NRI is in a foreign country, he/she can hold investments, assets, and even bank accounts in India. Most NRIs generally prefer opening NRE (Non-Resident External), or FCNR (Foreign Currency Non-Resident) accounts for this purpose.

But when an NRI returns to India with an intent to settle, he/she should redesignate such accounts to RFC accounts. The residency status change should also be informed to companies where an NRI holds shares, partnerships, or other interests.

Be Tax-Aware When Moving to India

Tax-planning is one of the most important considerations for NRIs wanting to return to India for good.
Keep the points mentioned above in mind while planning your taxes so that you can make use of all the different provisions and facilities available for returning NRIs.

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DISCLAIMER

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.



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