Reasons Why NRI Moving Back To India: Financial, Tax, and Legal Checklist

The decision for an NRI moving back to India is a significant life event, driven by a desire to be closer to family, explore new career opportunities, or enjoy retirement in a familiar cultural setting. While emotionally rewarding, this transition is a complex process that extends far beyond just booking a flight. A successful return requires meticulous planning across financial, legal, and lifestyle domains to ensure a smooth and seamless integration back into life in India. This guide provides a comprehensive checklist to help you navigate this important journey.

Reasons Why NRIs Are Moving Back to India

The trend of NRI returning to India permanently is growing, fueled by a combination of personal and professional motivations. Understanding these drivers helps frame the importance of a well-thought-out relocation plan.[1]

• Family and Cultural Connections: Many NRIs return to care for ageing parents, provide their children with an Indian cultural upbringing, and reconnect with their extended family and roots.
• Economic and Career Opportunities: India's rapidly growing economy, particularly its booming startup ecosystem and expanding IT sector, offers exciting and high-growth career prospects that are now comparable to global standards.
• Improved Quality of Life: For many, the ability to afford domestic help, be part of a strong community, and enjoy a vibrant social life contributes to a significant improvement in their day-to-day quality of life.
• Retirement Planning: India offers a culturally familiar and affordable environment for retirement, allowing NRIs to enjoy their post-work years in comfort and closer to their support systems.

Key Things NRI Need to Plan Before Moving Back to India

A successful transition requires careful planning across several key areas. Breaking down the process into manageable steps can make the entire move less overwhelming and more organised.[1]

Financial Planning

This is the most critical aspect of your return. Proper financial planning for Non-Resident Indians will ensure your wealth is managed efficiently and in compliance with Indian laws.

• Repatriate Funds and Investments: Plan the transfer of your foreign funds to India. Understand the rules and tax implications of bringing your money back. A clear understanding of NRI repatriation strategies is essential.
• Redesignate NRE/NRO Accounts: Once your residential status changes, you are required to convert your NRE/NRO accounts into resident accounts or Resident Foreign Currency (RFC) accounts. Inform your banks well in advance.
• Plan Taxation of Global Income: Be prepared for the shift in your tax status. Once you become a Resident and Ordinarily Resident (ROR), your global income will be subject to Indian tax laws.
• Consider New Investment Options: Your investment strategy will need to change. Explore resident investment options like Public Provident Fund (PPF), and realign your portfolio of mutual funds, FDs, and real estate.

Housing and Property

Securing a place to live is a top priority. Your housing decision will impact your family's lifestyle, commute, and access to essential amenities. 

• Manage Overseas Property: Decide whether it is more financially prudent to sell your overseas property, rent it out for a steady income stream, or keep it for future use.
• Plan for Housing in India: Research the real estate market in your chosen city. It is often advisable to rent a property for the first year to get accustomed to the city before committing to an NRI buying property in India.
• Understand Property Regulations: Familiarise yourself with Indian property tax laws, ownership rules for returning NRIs, and the process of legal due diligence for NRIs in Indian real estate.

Employment and Career

Aligning your professional goals with the Indian job market is crucial for your financial stability and career growth after returning.

• Explore Job Opportunities: Start networking and exploring job opportunities in India at least 9-12 months before your move. Tailor your resume to the expectations of Indian employers.
• Evaluate Business Ventures: India's startup ecosystem is thriving. If you have entrepreneurial ambitions, research the market, understand the regulatory landscape, and create a solid business plan.

Family and Education

Ensuring a smooth transition for your family, especially your children, is a key component of a successful move.

• Choose Schools and Universities: Research schools for your children well in advance, as admission timelines for top institutions can be very competitive. Understand the different educational boards like CBSE, ICSE, and IB.
• Research Healthcare Facilities: Identify reputable hospitals and clinics in your chosen locality. It is also essential to purchase a comprehensive family health insurance policy in India as your overseas coverage may no longer be valid.

Lifestyle and Logistics

The practical aspects of the physical move require careful coordination and planning.

• Hire Relocation Services: Engage a reliable international moving company to handle the shipping of your household goods and personal belongings.
• Update Official Documents: Upon your return, one of the first tasks is to update your residential status on your PAN card and Aadhaar. Ensure your bank KYC is also updated to reflect your new resident status.

Tax and Legal Considerations

The shift in your residential status brings significant changes to your tax liabilities. Understanding NRI taxation in India is critical to ensure compliance and avoid penalties.[2]

Change in Residential Status (under Income Tax Act)

Your tax obligations are determined by your residential status, which changes based on your physical presence in India.

• How Status Changes: You will become a 'Resident' for a financial year if you stay in India for 182 days or more. After a couple of years, you will likely transition to a 'Resident and Ordinarily Resident' (ROR).
• When Global Income Becomes Taxable: Once you attain ROR status, your entire global income (income earned both in India and abroad) becomes taxable in India, which is a major shift from the income tax for non resident indian rules.

Tax on Foreign Assets and Income

As a resident Indian, you have new reporting obligations regarding your wealth outside India.

• Declare Foreign Assets: It is mandatory to declare all foreign assets, including bank accounts, shares, and properties, in your annual Indian Income Tax Return (ITR).
• Understand DTAA Benefits: To prevent being taxed on the same income in two countries, India has a Double Taxation Avoidance Agreement (DTAA) with many nations. Understanding the specific DTAA income tax treaty with your previous country of residence is crucial.

NRI Bank Accounts and Investments

Your banking and investment accounts must be realigned with your new resident status.

• Convert NRE/NRO Accounts: You must inform your banks to redesignate your NRE and NRO accounts as standard resident savings accounts or special Resident Foreign Currency (RFC) accounts.
• Implications for Investments: Your demat account must be converted from an NRI account to a resident demat account. Similarly, you must update your KYC status with mutual fund houses to reflect your change in residency.

Managing Investments as a Returning NRI

Your investment strategy must evolve as you transition from an NRI in India to a full-time resident.[2]

• Review Existing NRI Investments: Decide whether to continue holding your overseas investments or liquidate them. This decision will depend on your new financial goals and the tax implications in India.
• Re-evaluate Risk Profile: Your risk appetite and financial goals may change after moving back. It is a good time to re-evaluate your entire investment portfolio with the help of a financial advisor.
• Explore New Tax-Saving Options: As a resident, you now have access to a wider range of tax-saving investment options that were previously restricted, such as the Public Provident Fund (PPF) and other government schemes.

Step-by-Step Checklist for Returning NRIs

To keep your move organised, use this simple checklist to track your progress and ensure you cover all the important steps.[2]

• Step 1: 12-18 Months Before Moving: Start researching cities, job markets, and schools.
• Step 2: 9-12 Months Before: Begin financial planning, consult with a tax advisor, and plan your NRI money transfer to India.
• Step 3: 6 Months Before: Finalise your job, secure school admissions, and begin your housing search.
• Step 4: 3 Months Before: Arrange for international movers and start the process of sorting your belongings.
• Step 5: 1 Month Before: Notify your overseas banks, update your new address, and prepare your family for the move.
• Step 6: Upon Arrival: Immediately begin the process of updating your KYC with Indian banks and converting your NRE/NRO accounts.

How NoBroker Can Help with NRI Services?

For an NRI moving back to India, managing property-related tasks from abroad can be a significant challenge. NoBroker's dedicated exclusive services for NRI home owners are designed to simplify this process. We offer end-to-end assistance, from helping you find the best cities in India to invest in for NRIs to managing the entire process of an NRI buying property in India. Our team also provides expert NRI legal assistance to ensure all your transactions are legally compliant and secure.