Returning Indians are those Indians who are likely to return to India for good from the country where they were resident.
Yes, Returning Indians may hold, own, transfer or invest in foreign currency, foreign security or any immovable property situated outside India if such assets were acquired, held or owned by them when they were a non-resident or were inherited from a non-resident person.
No, RBI permission is not required.
|Asset||Treatment to be given|
|Non-Resident Ordinary (NRO) A/c||Re-designate to Resident a/c|
|Foreign Currency Non-Resident (FCNR) A/c||Hold upto maturity; Upon maturity should be converted into Rupee Account or RFC a/c|
|Non-Resident External (NRE) A/c||Re-designate to Resident a/c or transfer balance to RFC a/c|
|Shares and Securities||Returning Indian is required to inform the Depository/ Companies about change of his/her residential status from non-resident to resident|
RFC a/c is known as Resident Foreign Currency a/c and a person resident in India including Returning Indians may open, hold and maintain such account with an AD in India. Funds held in RFC a/c are fully repatriable and denominated in forex.
Upon return to India for good, Returning Indian ought to inform the following persons about the change in their residential status:
- AD Bank with whom they hold banking accounts
- Depository participant with whom they hold DEMAT accounts
- Companies where NRIs are Shareholders / Debenture holders and firms where they are partners
Returning Indians are not required to report about their change in residential status to RBI. However, they are required to mention his revised status while filling his return of income with the Income Tax Department.
Further, Returning Indians upon becoming ROR as per The Act is required to report their Overseas Assets in their ROI to be filed in India annually in Foreign Asset (FA) Schedule. However, they are not required to report about their overseas assets to RBI.
The scope of taxable income for a Financial Year (FY) would depend upon the Residential Status (RS) of Returning Indian under The Act. The residential status in turn depends on the physical presence of the Returning Indians in India during the FY and prior 10 FYs.
Accordingly, taxability of income earned by Returning Indian shall be as under:
- if his/her RS is as a Non Resident in the year of return to India, then income earned outside India shall not be taxable in India in that year.
- if his/her RS is as a RNOR then income earned outside India shall not be taxable in 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 his/her RS is as ROR in the year of return to India then income earned in India and outside India shall be taxable in India 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 the exposure to tax in India of the income outside India.
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 NR 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).
It shall be noted that Returning Indians are required to re-designate their NRE a/c to Resident a/c or transfer funds to RFC a/c immediately on their return to India. However, FCNR a/c may be held up to maturity.
- Interest income on NRO a/c / term deposits in NRO a/c –
A Returning Indians, 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 a/c shall be taxable.
- Interest income on NRE A/c/ term deposits in NRE A/c-
A Returning Indian, upon return to India for good will have to either re-designate such NRE account to resident rupee account or transfer the balance to RFC a/c.
The interest income from NRE A/c is exempt in the hands of person resident outside India as per FEMA. As the Returning Indian (person who has come to India for good) will no longer be person resident outside India as per FEMA, accordingly interest earned on such re-designated rupee a/c will be taxable from the year of return. However, 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.
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. Returning Indian upon becoming ROR, it shall be at the discretion of Returning Indians to avail the benefits of concessional rate of tax on meeting all the prescribed conditions.
Income earned from assets held outside India by a Returning Indian will not be taxable till his residential status will be RNOR under the IT Act.
|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
• Foreign exchange acquired before 8th July, 1947 or any income arising on it which is held outside India with RBI permission
|• No restrictions on utilisation in/ outside India.|
Balance in RFC a/c 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.
Interest on RFC a/c will be exempt from tax as long as Returning Indians residential status under The Act is “RNOR”.
NRIs are taxed at concessional rate on certain specified assets subject to specified conditions. The Returning Indian may continue to get the benefit of such concessional tax rate till the transfer / conversion (otherwise than by transfer) into money of such assets i.e., on maturity or closure of the deposit by premature withdrawal.
- Resident Indians are mandatorily required to quote Aadhar Number/ Enrolment ID of Aadhar in ROI in India and hence Returning Indian must obtain the same before the due date for filing the ROI.
- AL is a Schedule of the ROI which is required to be mandatorily filled by Individuals and HUFs, if their total income exceeds Rs. 50,00,000/- in a FY. The said Schedule requires reporting of specified Indian Assets and corresponding Liabilities at the end of the FY. Thus, Returning Indian will need to comply with such reporting requirements if their income exceeds Rs. 50,00,000/- in a FY.