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Thinking of packing your bags and returning to domestic shores for good? You are not alone. In the wake of the COVID-19 pandemic, many NRIs are feeling the urge to settle permanently in India and to start afresh in the motherland. But the biggest worry in the mind of most NRIs is related to financial changes and the management of their bank accounts after moving back to the home base. Not an issue. The key to handling money matters wisely on relocating is to adopt a systematic approach.
Notify Bank of Change in Residency Status
It's the responsibility of the NRI to notify the bank of the change in residency status on returning to India. Upon being intimated, the establishment will carry out the necessary paperwork required for the existing bank accounts.
The process is straightforward and involves submitting a duly signed form to the local bank branch with information such as account number, joint holder details (if any), and the id of all account holders. Besides the bank, others like insurers, mutual funds, and depository service providers must be informed of the change in residency status.
Re-designate Existing NRE/FCNR Accounts
It's no secret that NRIs can hold investments, assets, and even bank accounts in India. They generally open NRE (Non-Resident External) or FCNR (Foreign Currency Non-Resident) bank account to repatriate funds to India in any currency.
However, within three months of moving back, NRI bank accounts have to be converted into Resident Foreign Currency accounts to avoid violation of the Foreign Exchange Management Act (FEMA).
Benefits of RFC Account
RFC account is the perfect financial instrument for NRIs to park their funds in any foreign currency denomination once they return for permanent stay in the country. Apart from holding the foreign currency, the amount deposited (principal + interest) in the RFC account is fully repatriable. There are more benefits.
The RFC account can also be utilised by migrating NRIs for any assets held abroad; income received in relation to employment, pension, investments or sale of immovable property outside India.
Tax Implications for Returning NRIs
For taxation in India, it's important to ascertain whether the NRI falls under the ROR (Resident and ordinarily resident) or the RNOR (Resident but not ordinarily resident) category. As per the Income Tax Act (ITA) of India, NRIs with RNOR status can save taxes on their global income as well as their FCNR and NRE accounts. However, the income earned in India is taxable.
Be Smart. Be Proactive
Managing bank accounts judiciously is the main concern of NRIs wanting to move back to India for good. Thus, it's important to be well-versed with the different facilities available to them. Awareness not only helps avert mistakes but also makes the financial process easier to ensure a smooth transition.