Returning Indian

1. Who are Returning Indians?

Ans.

Returning Indians are persons who returns to India for good/permanent settlement from the country where they were residing.

2. Can a Returning Indian hold Overseas Assets?

Ans.

Yes. Returning Indians can continue:


·   To hold all kinds of foreign exchange/overseas assets such as properties, bank deposits, stocks and securities, life insurance policies, debentures, bonds etc. acquired, held or owned by him/her as a NRI while abroad or inherited from a person

·     To deal with the overseas assets in any manner even after returning to India for permanent settlement

3. Is RBI permission required by Returning Indians for retaining their overseas assets after their return to India?

Ans.

No, RBI permission is not required.

4. What shall be the impact on Indian Assets?

Ans.

A Non-Resident Indian (NRI) who is returning to India is required to declare about the change in Residential Status and his intention to stay in India for good. Such declaration can be standard communication and shared with authorities like Authorized Dealer i.e. all Banks, where one holds banking accounts (NRO, NRE, FCNR etc.), Depositories where securities/investments are held, Mutual fund houses etc. The authorities shall make record of change in Residential status from Non-Resident to Resident and accordingly, re-designate the accounts as under:

Asset

Treatment to be given

Non-Resident Ordinary (NRO) account

Re-designate to Resident rupee account

Foreign Currency Non-Resident (FCNR) account

Hold upto maturity; Upon maturity should be converted into Rupee Account or RFC account

Non-Resident External (NRE) account

 

Re-designate to Resident Rupee account or transfer balance to RFC account

(As per the choice of the account holder)

Shares and Securities

Holdings shall be changed to Resident holdings from Non-Resident holdings, as per standard process.


5. Any prescribed timeline for Returning Indians to re-designate the account/assets mention in FAQ No. 4?

Ans.

There is no prescribed timeline, but one needs to convey as soon as one has decided to settle in India for good.

6. What is an RFC account and who can open it?

Ans.

RFC account is known as Resident Foreign Currency account. A person resident in India including Returning Indian is eligible to open and maintain such account with an Authorised Dealer Bank in India. RFC account is denominated in forex and funds held in the account are fully repatriable.  

7. Is NRI required to inform anyone when he returns to India permanently?

Ans.

Upon return to India for good, Returning Indian is required to inform the following authorities about the change in the Residential Status:


  i.    Authorized Dealers i.e. all Banks, where one is holding all banking accounts (NRO, NRE, FCNR etc.)

 ii.    Depository participant where securities/investments are held

iii.    Mutual fund houses

iv.    Companies where Non-Resident Indian is shareholder/debenture holder and firms/LLPs where one is partner

 v.    If any other asset/holdings in India, inform the dealer/broker accordingly.


8. Whether a Returning Indian is required to inform Government Authorities about his change in Residential Status and overseas assets that he holds?

Ans.

Returning Indians are required to report to the following authorities as under:

·         To Income-tax Department: Returning Indian is required to:

-   Mention his/her revised Residential Status under the Income-tax Act, 1961 (‘the Act”) while filing his Return of Income with the Tax Department.
-   Report his/her overseas assets in Foreign Asset (FA) Schedule in Return of Income upon becoming Resident and Ordinarily Resident as per the Act

·         To RBI: No need to report about change in Residential Status and overseas assets to RBI.

9. How much funds can NRI who has returned to India, repatriate from India?

Ans.

NRI is allowed to repatriate funds from balances held in NRO account upto One Million USD per Financial Year (April 1 till March 31). However, upon returning to India, one shall become a Person Resident in India as per FEMA. Accordingly, he/she shall be allowed to repatriate funds under Liberalized Remittance Scheme upto USD 2,50,000/- per Financial Year (“FY”).

10. What shall be the tax implications on the income earned by a Returning Indian as per the Act?

Ans.

The scope of taxable income for a FY would depend upon Residential Status (“RS”) of Returning Indian under the Act. The RS depends on physical presence in India during the FY and prior 10 FYs.
 
Accordingly, taxability of income earned by Returning Indian shall be as under:
 
·         If RS is Non-Resident in the year of return– then income earned outside India shall not be taxable in India in that FY
·         If RS is  RNOR in the year of return – then income earned outside India shall not be taxable in India (except for business/profession set up outside India and controlled from India) as long as his RNOR status is achieved in the year of return and later years by restricting number of days stay in India (Generally one can achieve RNOR status for a period of two years subsequent to the year of return)
·         If RS is ROR in the year of return- then income earned in India and outside India shall be taxable in India in the year of return.

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

11. What is the best time for Returning Indian to move to India for good?

Ans.

A Returning Indian should come back on or after February 1 (or February 2 in case of a leap year) of a FY in order to ensure Non-Resident status in the year of return. However, if stay in India in 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).

12. Whether Returning Indians are allowed to keep balances held in NRE / FCNR account on their return to India?

Ans.

It shall be noted that Returning Indians are required to re-designate their NRE account to Resident account or transfer funds to RFC account immediately on their return to India. However, FCNR account may be held up to maturity.

13. What shall be the tax treatment of interest earned on NRO account and NRE account held by Returning Indian upon his/her return to India?

Ans.

· Interest income on NRO account / term deposits in NRO account – A Returning Indian, 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 account shall be taxable.


· Interest income on NRE account/ term deposits in NRE account - A Returning Indian, upon return to India for good will have to re-designate NRE account to either resident rupee account or transfer the balance to RFC account. Further, the taxability of interest income earned from such re-designated account shall be as under:



-      If NRE account is converted to Resident Rupee account – Interest income from NRE account is exempt from tax till the person is resident outside India as per FEMA. Returning Indians no longer remain person resident outside India under FEMA and accordingly, interest earned from resident rupee account shall become taxable from the date of return.



-      If funds held in NRE account is transferred to RFC account: Interest earned on RFC A/c deposits (approved by RBI) is exempt from taxes till the time the Returning Indian qualifies as RNOR as per The Act. Further, upon becoming ROR as per the Act, interest income earned on RFC A/c shall be taxable in India as per the slab rate (highest being 30%). However, Returning Indians has an option to tax interest income from RFC account at concessional rate of 20% (plus applicable surcharge and cess), under Chapter XIIA of the Act comprising sections 115C to 115I, instead of slab rate, provided prescribed conditions under the said Chapter are fulfilled.


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

Ans.

Interest earned on FCNR deposit is exempt from tax in the hands of Returning Indian till the time the Returning Indian is NR or RNOR as per The Act. Upon becoming ROR, the interest income from FCNR shall become taxable as per the slab rate (highest being 30%). However, Returning Indians at his discretion can avail the benefit of concessional rate of tax of 20% upon meeting all the prescribed conditions under Chapter XIIA of the Act.

15. Is income received outside India from assets held outside India taxable for a Returning India?

Ans.

Income earned from assets held outside India by a Returning Indian will not be taxable till his RS will be RNOR under the Income-tax Act, 1961. However, any business/profession set up outside India but managed from India will be taxable in India.

16. What are permissible transactions in RFC account?

Ans.

Permissible credits

Permissible Debits

·         Foreign exchange received as pension / superannuation / other monetary benefits from the employer outside India

·         Foreign exchange received on sale of overseas assets /  gift or inheritance / proceeds of life insurance policy and repatriated to India

·         Balances in NRE/ FCNR (B) accounts on change in residential status from Non-Resident to Resident

·         Foreign exchange acquired before 8th July, 1947 or any income arising on it which is held outside India with RBI permission

·         No restrictions on utilization in/ outside India.

17. Whether funds in RFC accounts can be remitted abroad?

Ans.

Balance in RFC accounts can be utilized without any restrictions for remittance and/or investment abroad. It can also be utilized for maintenance of dependents or any other personal purposes outside India.

18. What are benefits of RFC accounts?

Ans.

The benefits of RFC accounts are:

·     Interest from RFC account is exempt from tax till the RS under the Act is RNOR and funds held in such account is freely repatriable

·     In future, if your RS changes to Non Resident again, the funds parked in RFC account can be transferred to NRE/FCNR account, which is again freely repatriable

19. Can benefit of concessional tax treatment under chapter XIIA of the Act comprising sections 115C to 115I be continued after Non Resident Indian returns to India?

Ans.

Non Resident Indians may be taxed at concessional rate on investment income from certain specified assets subject to specified conditions. Returning Indian may continue to get benefit of such concessional tax rate till the transfer / conversion into money of such assets

20. Any additional compliance required by Returning Indian on their return to India?

Ans.

· Resident Indians are mandatorily required to quote Aadhar Number/ Enrollment ID of Aadhar in Return of Income. Hence, they must obtain the same before due date for filing ROI.

· Asset Liability (AL) Schedule is required to be mandatorily filled by Individuals and HUFs, if total income exceeds Rs. 50,00,000/- in a FY. Such schedule requires reporting of specified Indian Assets and corresponding Liabilities at the end of each FY along with Return of Income

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

Ans.

Returning Indian, upon becoming resident, he/she can hold foreign coins without any limit.

 Updated 10/2023