As an NRI, you have decided to return to India and are wondering
how you should go about it. Well, Non-resident Indians, wishing to return to
India may get perplexed determining what exactly they should do so as to move
back to their homeland seamlessly.
Here are a few things which NRIs’ should do well to remember and
take care so that they can achieve this smooth transition.
Account Conversion:
NRO
The bank needs to be informed that your status will change from a
Non-resident to a Resident and hence the account has to be changed from an NRO
account to a resident account. NRO savings bank accounts also be maintained
with the Post Offices in India.
The Reserve Bank of India specifically states that NRO accounts
can be opened and maintained in the form of current, savings, recurring or
fixed deposit accounts. The account can
be held jointly with residents and /or non-residents also. It is also to be
noted that the account is to be denominated in Indian Rupees only.
FCNR (B)
FCNR (B) or the Foreign Currency Non Resident (Bank) Accounts
should be held till maturity and thereafter should be mandatorily converted to
a Rupee account. FCNR (B) accounts are only in the form of term deposits of
period ranging between 1 to 5 years.
Loans are allowed against security of funds held in FCNR (B)
deposit. This is however subject to the usual margin requirements.
NRE
Like in case of FCNR, the NRE account should also be converted to
a resident account on return. This account
too can be maintained in the form of savings, current, recurring or
fixed deposit accounts. Balances held in this account are freely repatriable. Accrued
interest income and balances in NRE accounts are exempt from Income Tax and
Wealth Tax respectively.
Shares, Securities and Mutual Fund Units
It is advisable to close the PMS and DP accounts and open a fresh
account as a resident individual. The broker and depository participant has to
be informed about the impending change in status before moving in to India.
This change of status will mean lesser intricacies in handling the share
holdings.
Other Salient Points:
I. It is possible to retain the foreign currency holding in the
hands of the NRI migrating to India. This is possible by contacting an
authorized dealer who will facilitate the opening of a Resident Foreign
Currency Account. This account can be utilized to hold foreign exchange
denominated in foreign currency.
II. A good news for NRIs’ intending to settle back permanently in
India is that any asset that the NRI may choose to bring with him is exempt
from tax.
III. A person of NRI status, retuning to India after staying
abroad for a period of nine years or more shall attain the status of a
‘resident, but not ordinarily resident’ (RNOR) for two successive years.
IV. A tax planning strategy is always desirable. If an NRI intends
to come back to India after a stint abroad, then it is advisable that he or she
does not return in the beginning of the financial year. This is due to the fact
that holding heavy amounts of fixed deposits and rentals attracts tax at higher
rate slabs. However, if the NRI migrates to India only after a substantial part
of the year has lapsed, his tax liability gets substantially reduced.
The above facts and tips are expected to help NRIs’ at the time
they decide to give up their adopted country for their homeland. The
information thus shared is likely to help the NRIs’ avoid common mistakes and
traps and will also contribute towards the better adaptability and reduction in
avoidable tax liability.
The
author is Ramalingam.K an MBA (Finance) and certified financial planner. He can be reached at
ramalingam@holisticinvestment.in and www.holisticinvestment.in
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