NRI Tax Roadmap on returning to India after years abroad

🇮🇳 Returning to India? Here’s Your NRI Tax Roadmap

For non-resident Indians, returning to India after years abroad is more than just a change in pin code—it’s a deeply emotional, symbolic journey. There’s excitement, nostalgia, and hope… but also a new chapter of responsibilities, especially when it comes to Indian tax laws.

Amidst all the homecoming celebrations, one silent welcome comes from the Income Tax Department, in the form of Form 26AS and a fresh tax identity. Understanding your residential status and its effect on global income taxation is key to ensuring a smooth financial transition.

Why Are NRIs Returning?

Pull factors:

• Starting a business in India’s growing economy.

• Raising children closer to extended family.

• Retiring comfortably in a lower-cost, culturally familiar environment.

Push factors:

• Visa and immigration hurdles.

• Rising cost of living abroad.

• Uncertainty in job markets overseas.

Decoding Tax Residency

Contrary to popular belief, your global income doesn’t instantly become taxable in India the day you land. Your tax residency status is determined by Your physical presence in India during the financial year (FY) & Your stay in India over the past 4–10 years. Key Considerations Before Moving Back

1. Clarify Your Intention: Is the move permanent or temporary? or Are you shifting for work, retirement, or family?

2. Explore the Environment: Spend a few months in India before committing. and understand job market, education system, and infrastructure.

3. Be realistic: Life in India is different, not better or worse. & Expect some discomfort in re-adapting to local ways.

India classifies individuals into three tax categories:

1. NRI (Non-Resident Indian)

2. RNOR (Resident but Not Ordinarily Resident)

3. ROR (Resident and Ordinarily Resident)

Example: Aryan returns to India in July 2025 after 12 years in the U.S. He’ll spend more than 182 days in India during FY 2025–26, qualifying him as a resident. However, because he was a non-resident for 9 of the last 10 years and has spent fewer than 730 days in India in the past 7 years, he gets RNOR status. This transitional RNOR status gives him 2–3 years of tax relief, where most of his foreign income is not taxable in India.

Residency & Tax Status

• You transition from NRI → RNOR → ROR:

  • RNOR: Transitional tax status offering some global income exemptions.

  • You qualify as RNOR if:

    • NRI in 9 out of 10 preceding years, or

    • In India ≤ 729 days in the last 7 years.

• After RNOR, you become Resident and Ordinarily Resident (ROR)—liable to pay tax on global income.

What Happens When RNOR Status Ends?

Once Aryan becomes an ROR, all global income becomes taxable in India. That includes:

• Rent from overseas properties

• Interest from foreign bank accounts

• Dividends from foreign stocks

• Gains from overseas mutual funds or ETFs

• Crypto profits or retirement withdrawals abroad

Smart Strategies for a Smooth Return

a. Preserve NRE & FCNR Accounts

• Banking, Investments & Compliance – Convert or close NRE/NRO accounts → resident accounts. PIS account → regular Demat/broker account.

• • Maintain FCNR deposits till maturity, then convert.

  • FCNR interest remains tax-free until maturity—even after becoming ROR

  • NRE interest is tax-free only while RNOR. Plan withdrawals accordingly.

  • Update KYC in all bank/investment accounts & Revise nominees and create a new will in India.

  • Insurance bought abroad won’t work—buy Indian life & health insurance.

b. Disclose Foreign Assets

• Once ROR, you must disclose foreign assets and income in Schedule FA of your ITR. Report under Schedule FA in ITR.

• Non-disclosure can lead to penalties under the Black Money Act. & Stay compliant with Black Money Act—serious penalties apply for nondisclosure

c. Use DTAA Benefits

• India has Double Taxation Avoidance Agreements (DTAA) with over 90 countries.

• You can claim credit for taxes paid abroad on pensions, dividends, or salary.

• Action Steps for Financial Planning

  1. Rework Your Financial Plan:

     • Adjust to INR income, higher inflation, lower salaries.

     • Keep a 12–18 month emergency fund in INR.

     • Consider USD savings for overseas expenses like children’s education.

  2. Repatriate Funds Strategically:

     • Use RNOR window to phase foreign asset transfer.

     • Avoid transferring everything at once.

     • Claim tax benefits using DTAA + Form 67 + Tax Residency Certificate (TRC)

d.  Time Your Return Strategically

• Arriving after October 2 helps retain NRI status for the year (if total stay <182 days).

• Delaying return can give you an extra year of foreign income exemption.

e. Delay Indian Property Sale

• NRIs selling property attract 20% TDS.

• As a resident, this drops to 1%—so time the sale post-return.

f. Mind Your Foreign Retirement Accounts

• 401(k)s, UK pensions, and Gulf EPFs may be tax-deferred abroad.

• But post-ROR, withdrawals may be taxable in India—even if funds stay abroad.

g. ESOPs & RSUs

• If foreign stock options vest or are exercised after becoming ROR, gains are taxable.

• Plan vesting and exercise timing wisely.

h. Choose Old vs. New Tax Regime

• RNORs can opt for old regime (with 80C/80D benefits) or new regime (lower rates).

• If you claim deductions (NPS, home loan, insurance), the old regime may suit you better.

i.  Know When & How to File ITR

• If you’re RNOR and Indian income exceeds ₹4 lakh, ITR filing is mandatory.

• If you’re still an NRI with only exempt NRE/FCNR interest, filing may not be needed.

• Once you’re ROR, global income and foreign assets must be disclosed.

Use ITR-2 if you have foreign income or assets.

Lifestyle & Resettlement

• Don’t rush to buy property; rent first, explore localities.

• Schooling is a major transition—plan ahead.

• Retain some foreign assets for Diversification, Protection against INR depreciation & Re-migration flexibility

• Prepare for culture shock: traffic, bureaucracy, pollution, social pace.

Voices of NRI Returnees

• Vikrant Gupta (Australia): “Frugal lifestyle + adaptive mindset = smoother transition.”

• Ronak Gala (US): “Still discovering if we’ll stay. Kids and social life will decide.”

• Aadam Mamaji (Canada): “Avoid high expectations. Return is rewarding—but different.”

• Palak Chauhan (US): “Strong financial planning gives us confidence to return.”

NRI remittance taxation & compliance rules for 2025

• Taxability of Remittances: Money sent to India by a non-resident Indian is not taxable if the income originates outside India. Example: A foreign salary is transferred to India, then there is no additional tax in India. Outgoing remittances from the US: No direct tax, but gift reporting applies.
• Gift Tax Rules (US): Gifts above USD 19,000 per person annually (2025 limit) must be reported via Form 709. No immediate tax due to lifetime exemption of USD 13.99 million.
• Indian Gift Tax Rules: Gifts to blood relatives (spouse, children, parents, siblings, and in-laws) are fully exempt. And gifts to non-relatives > INR 50,000/year are then taxable as the recipient’s income.
• Reporting Obligations (US Residents): FBAR (FinCEN Form 114): Required if foreign accounts (including NRE) exceed USD 10,000 anytime during the year. FATCA (Form 8938): Applies at higher thresholds.

Proposed Remittance Tax Non-Resident Indian remittance taxation and compliance rules for 2025

• Originally 5%, now revised to 1%, likely effective after Dec 31, 2025. Exemptions: Transfers from US bank accounts and US-issued debit/credit cards.

FEMA & Repatriation:

• Non-resident Indians can freely remit foreign currency to India. Repatriation limit: Up to USD 1 million per financial year for inherited property or post-retirement assets. India has DTAAs with many countries → Prevents double taxation on the same income.
• Plan remittances with awareness of gift reporting, Indian tax exemptions, and the upcoming 1% remittance tax. Maintain compliance with FBAR/FATCA and leverage DTAA benefits.

Final Thought – Quick Checklist for NRIs Returning to India

Your return to India is both a personal and financial transition. While reuniting with your roots, ensure you’re also aligned with India’s evolving tax laws.

• Plan your residency status
• Strategically time your return
• Disclose your foreign holdings

Quick Checklist for NRIs Returning to India