Returning NRIs also come with loads of paperwork & money (I hope so). Coming back is a crucial decision and it invites again dealing with change in status from NRI to Resident or change in status from NRI to RNOR. It involves a process to inform various intermediaries about change in residential status.
Whenever there is a change, we have to adhere to regulatory requirements. Let’s see what happens to your different investments when NRI returns to India.
Are you an NRI planning to move back to India? This article is for you.
Are you a resident Indian, to become NRI soon? Read This
Once you are back in India, you may have 2 status based on your NRI residency. These status are:
- Resident
- RNOR (Resident Not Ordinary)
We have written a detailed post on How Residency is Fixed. Click here to Read
Want to Read? Can NRI Invest in Real Estate? Click Here
As per the Indian Income Tax Act,
Resident Indian – A person would be a RESIDENT if
He/She is in India for 182 days or more during the financial year
OR
If he/she is in India for at least 365 days during the 4 years preceding that year AND at least 60 days in that year.
If you do no satisfy the condition laid out above– you will be considered a NON RESIDENT INDIAN.
NOW – Let’s Define RNOR
You will be considered RNOR in a year – if you satisfy one of the two conditions for a Resident as mentioned AND
- If you have been an NRI in 9 out of 10 financial years preceding the year
OR
- You have during the 7 financial years preceding the year been in India for a period of 729 days or less.
Somewhat tricky but this is how our authority defines change in status from NRI to RNOR.
The reason to know the difference between Resident & RNOR is – Tax Difference. For RNOR interest is tax-free like NRI.
RNOR status can be availed for 2 years.
Now let us see what changes when staus changes from NRI to Resident or RNOR
NRI Bank Accounts
Once you are a back you need to close your NRO, NRE & FCNR accounts.
You cannot have these accounts. If you are RNOR you can open RFC Account ((Resident Foreign Currency). RFC accounts can be kept in foreign currency.
Also, all FCNR & NRE FDs can continue till maturity. In case they mature, they can be converted to RFC account.
The RFC account allows credits from outside India. Credits in foreign currency are also allowed. These can be from the sale of assets outside India or income received outside India. These may arise due to employment, assets, investments made while your time spent abroad.
This can be done by contacting the bank and filling up the required paperwork.
In case you have some unfinished business or expecting money in the country you have returned, you may keep up your foreign account till the time you require it. You just need to declare that in the IT returns.
Trading / DEMAT Account
While being NRI you can only have a PINs account.
If you have an NRO DEMAT you need to convert to resident DEMAT. You can sell the stocks or transfer them to Resident DEMAT.
In the case of RNOR, the PINs will continue. If you are resident the normal resident account will be required and you can buy or sell using that account.
Process, you need to get in touch with Equity Broker and do the paperwork.
Mutual Funds
For mutual funds, it is the reverse procedure what you did when you became an NRI.
STEP 1: KYC to be modified.
STEP 2: Request to AMC folio wise for change in status & bank details.
PPF Account
Nothing changes, you just need to inform bank or post office about the change. This is crucial as in case you want to extend, you can once you are a resident.
The contributions can be done through a savings account or RFC account.
NPS Account
Here NRI needs to close the NPS account and he can open a new account as a Resident. The process can be done online using eNPS facility or by offline mode. For online facility Aadhar is a must. As NRI you were only allowed to open & operate Tier 1 account. Now you can have both Tier 1 & Tier 2 accounts.
Insurance
Nothing much changes. You can continue policies purchased when you were previously resident or purchased when you were an NRI.
You may also continue policies purchased while you were abroad. Just write to individual insurance company mentioning policy numbers and inform that the resident status has been changed.
Bonus TIP:
You should inform the PAN authority about the change of your address & status. This can also be done online here. http://tinyurl.com/2qfbov
Finally,
Overall it’s not a shock when you return to India, as RNOR status help you manage your tax to some extent. Just be prudent with your other paperwork and you will settle soon.
Some More Article on NRIs:
DTAA – Double Tax Avoidance Agreement
Income Tax Rules for NRIs
When you return, the priorities change as you may be busy catching old friends, searching new job, settling at a new location, etc. The above steps will help you address financial situations.
Feel free to ask if you have any other questions, in the comments section below. If you have returned and now settled, do share your learnings as it will help many fellow investors.
