Brochure
Learn more about our Firm and Services.
NRIs (Non-Resident Indians) often return to India due to a combination of factors, including:
- A strong family ties,
- A desire to be closer to ageing parents,
- A sense of cultural connection they miss or want their kids to experience while living abroad,
- The affordability of a comfortable lifestyle in India compared to developed countries,
- Career opportunities in a rapidly growing Indian economy or
- They may become bored with the routine of life abroad and seek the dynamism and excitement of living in India.
We understand the challenges NRIs face in complying with local, Indian and global tax laws and compliance requirements, FEMA provisions, as well as managing capital, bank accounts, investments and income in India and from abroad.
NeuronWealth provide personalized guidance to help returning NRIs smoothen the transition from abroad to India and manage financial products and investments that align with their portfolio and goals in the most tax efficient manner, considering income tax in India, their home country and Double Tax Avoidance Agreements (DTAA).
Our Founder and Principal Officer, Mr. Jigar Patel, himself has returned to India after 9 years in the USA. He not only understands the financial needs and expectations of the NRIs as well as the importance of compliance and tax efficient planning but also the emotional aspects of the move, priorities and managing family expectations and emotions.
Financial Decisions for NRIs to Make for Better Tax and Investment Planning Before Returning to India
When to Move
In India, based on intention, FEMA classifies individuals as either residents or non-residents, affecting transactions and overseas investments. The Income Tax Act, which governs taxation on compliant financial transactions, has three categories:
- Non-residents are taxed only on Indian income.
- Non-ordinary residents are taxed on Indian income and global business income.
- Ordinary residents are taxed on all global income.
Upon returning to India, FEMA status changes to resident immediately, but tax status under the Income Tax Act varies based on physical presence.
By planning their move strategically, a person can remain not ordinary resident for an extra year, gaining an additional year of tax exemptions on foreign currency deposit interest (FCNR) and overseas income (interest, dividends, capital gains) while avoiding foreign asset reporting, reducing tax liability and compliance.
How Much Money to Move?
Returnees must balance funds in India for expenses, assets, and investments while maintaining global diversification. Since most expenses (housing, living, leisure, etc.) and investments (FDs, mutual funds, stocks, PPF) are in Indian Rupees, holding a majority of assets in INR is advisable.
However, transferring all assets to India isn’t ideal due to the Indian rupee’s limited convertibility and investment restrictions. India’s markets lack depth and do not offer global stocks or diverse investment options like international equities, bonds, and real estate funds available outside India.
By strategically transferring funds, one can ensure liquidity for expenses, asset purchases, and investments in India while maintaining a globally diversified portfolio, reducing remittance costs, and simplifying compliance.
Move the Money in Whose Name?
In India, while assets can be jointly owned, there are no joint income tax returns, and the first holder is generally considered the owner. This means any income from the asset will be taxed under the first holder’s name.
Also, transferring funds or assets to a spouse or daughter-in-law will trigger clubbing provisions, meaning the original owner is still taxed on the income from the amount transferred.
After returning to India, if one spouse earns and the other doesn’t, keeping or investing in a joint name with the earning spouse as the first holder results in a huge tax. One can minimize taxes and simplify compliance by strategically deciding whose name to transfer funds to (self, spouse, children, parents, etc.).
When to Move Funds?
When you return to India, your FEMA residential status changes to resident immediately. Until the day before arrival, you are a non-resident, but once you arrive, you are a resident of India.
Since only non-residents can open or maintain NRE and FCNR accounts, after returning, you cannot open new FCNR FDs, and funds in NRE accounts should be transferred to a resident account.
Points to consider:
- NRE FD has a minimum tenure of 1 year, and no interest is paid if withdrawn earlier.
- Tax-free NRE interest is valid only if the account complies with FEMA rules.
- Transferring money to a spouse after returning may trigger tax clubbing, so shifting funds to an account where the spouse is the first holder before returning is advisable.
- Gifting money to parents can be done before or after returning.
- Investments available only to residents can be made only after returning.
Since fund transfer may involve asset liquidation and capital gains, it's crucial to analyse Indian and home country tax laws and DTAA before making financial moves.
In simple words, with smart planning, you can increase income, save taxes, and simplify finances when moving funds
How to Move Funds?
When an NRI moves to India and transfers his life savings, the exchange rate is the most important thing. A ₹0.50/$ rate can save ₹50,000 per $100K, and for $500K or $1M, savings can exceed ₹250K–₹500K.
For large transfers, wiring money to an Indian bank is the cheapest and fastest option. Paying a $50 wire fee can get at least ₹0.50/$ more than card rates, and for huge amounts, banks may offer ₹1/$ or more extra too.
However, banks may not always provide the promised rate due to fluctuations. Without direct access to the bank’s treasury, securing the best rate at the exact moment can be challenging.
While for smaller amounts (under $10k), opting for wire transfer with negotiated best rate is an ideal choice.
How to Structure Current and Future Income in India?
Returning NRIs often have a high annual income to support their lifestyle. Whether continuing with the same job, switching careers, starting a business, or joining a family business, proper income structuring is key for tax efficiency.
Spreading income among family members helps lower overall tax liability, rather than just focusing on the primary earner. Ideally, all family members should be in a similar tax bracket to maximise savings and minimize tax for the family..
Furthermore, the type of income also matters: salary income gets only a ₹75,000 standard deduction, while business/consulting income allows deductions for expenses but comes with added compliance like bookkeeping and GST.
Additionally, tax laws in foreign countries where you may still have tax obligations should also be considered while planning income in India. Structuring investments helps balance tax rates among family members, reducing the overall tax burden.
How to Manage Out of India Investments?
NRIs often keep some savings abroad for diversification, children’s education, or future needs instead of transferring everything to India. Before returning or while in ‘not ordinary resident’ status, planning when to buy, hold, or sell investments can help reduce tax liability.
However, some investments may have lock-in periods, exit charges, or legal restrictions, especially retirement or pension funds. ESOPs, RSUs and ISOs also need careful tax planning for award, vesting, and selling in India and the home country.
Additionally, investments in retirement accounts (401k/IRA, Roth/Traditional in USA, RRSP in Canada, SIPP in UK, Super in Australia, etc.) or non-retirement accounts require different strategies as well as asset allocation considering residential status as well as Indian and foreign tax laws and DTAA benefits.
It is crucial to determine which investments to retain, under whose name, for what purpose, duration, and in which countries. Proper asset allocation and global diversification in a tax-efficient manner are key to effective investment management.
How Early to Plan Finances Before the Move?
Returning to India can be planned or unplanned due to family, job, visa, or emergencies.
If planned, at least one month is required for banking, tax, and investment setup, but six months is preferred to avoid red flags on residency status, KYC, and large money transfers.
Return to India can be better managed either in 2 financial years (now tax years) in the same calendar year or 2 calendar years in the same financial year/tax year or 2 financial/tax and 2 calendar years for optimum income tax planning.
Why Hire a Reputable Advisor like Neuron Wealth LLP?
Moving back to India involves numerous decisions and factors to consider, including tax laws, regulations, and priorities are constantly changing. These decisions impact the whole family emotionally and financially, affecting investments, taxes, and compliance.
To ensure a smooth transition, it's important to make informed decisions. Given the overload of information today, finding reliable advice is challenging, so working with one trusted advisor like Neuron Wealth Advisors LLP is recommended. They can provide holistic advice and friendly guidance every step of the way and simplify the entire process for the family.
A right advisor needs a balance of knowledge and experience in:
- Indian Income Tax and FEMA Law
- Your home country's income tax laws
- Double Tax Avoidance Agreement (DTAA) between your home country and India
- Gift tax and money transfer rules and procedures
- Global Compliance requirements
- Structuring your Income in India
Importance of These Financial Decisions
Moving to India with your family is a significant life decision. While factors like timing, names, and amounts of fund transfers may seem smaller, they are actually crucial decisions with a high return on investment (ROTI).
For instance:
- By planning your move to maintain Not-Ordinary Resident status for an extra year, you gain more time to manage foreign income and assets.
- Structuring your income in India with consideration of both Indian and foreign tax laws can save taxes every year.
- Planning your Fixed Deposits (FDs) in India can help reduce your tax liability after moving.
- Managing funds abroad effectively can lower your taxable income in India or avoid taxation altogether.
- Transferring funds when exchange rates are favourable could save you a significant amount.
- Transferring funds or giving gifts tax-efficiently can minimize the family's overall tax liability.
- Managing investments in India and abroad while ensuring compliance with relevant laws avoids scrutiny and tax notices in any country.
- And many more….
What about the Assets Held Overseas?
We optimize whether to hold or sell your overseas assets and investments to streamline your tax planning. If we decide to hold them, we ensure proper reporting of income and assets in your returns. For foreign investments that we decide to dispose off, we guide you about when to sell to optimize Indian or foreign taxes on the capital gain income.
Rework Financial Plan
If you are planning to relocate to India after living abroad, it's crucial to reassess your financial plan. Tax implications, legal requirements, investment options, products, strategies, cash flow, goals, risk profile, return requirement, income, expenses, assets, and liabilities will change, making it essential to review your entire financial strategy. At Neuron Wealth, we will guide you through this process to ensure a smooth transition.
Why Choose Us as your NRI Return to India Investment Consultant?
Neuron Wealth Advisors LLP is a SEBI Registered Investment Adviser (RIA) offering fiduciary comprehensive financial planning, investment, taxation, compliance, and wealth management services.
Our holistic approach helps clients make informed decisions, optimize taxes, and build, protect, and preserve wealth across generations while complying with laws.
For those returning to India, we educate families on applicable laws, share our insights, and guide them through the process. We assist with bank account openings, secure better conversion rates, and structure investments and income in India and abroad to minimize taxes and ensure a smooth home transition.
Assistance for NRI Returning to India
Strategic Tax Planning: Leveraging deep knowledge of Indian and international tax laws, we ensure compliance and efficiency in managing global and Indian investments and income.
Asset Repatriation: From real estate to investments, we provide comprehensive strategies to transfer overseas assets while minimizing taxes and adhering to FEMA and RBI regulations.
Wealth Optimization: With a focus on creating, preserving, and growing wealth, we advise on the best tax-saving instruments and tailored investment strategies aligned with your goals.
Simplified Compliance: We navigate the complexities of re-designating bank accounts, updating KYC, and restructuring investments, making your financial transition effortless.
Legacy Planning: As an expert in multi-generational wealth management, Jigar Patel and his team ensure your wealth is protected and strategically positioned for future generations.
FAQs
When you return to India, you are considered a resident under FEMA from the day of your return. For income tax purposes, your status may be non-resident, not ordinary resident, or ordinary resident based on when you return and how many days you have spent in India in the last 7 years.
When you return permanently to India, you are considered an Indian resident under FEMA from the day of your return, and you are not allowed to maintain an NRE account. You need to close the NRE account and transfer the funds in the NRE to the resident account or the Resident Foreign Currency (RFC) account.
When you return to India, carefully choose whose name to transfer funds to, as the first holder of joint assets is taxed on the income. Transferring to a spouse or daughter-in-law may trigger clubbing provisions, keeping the original owner liable. So, to optimize taxes and compliance, it is best to transfer them to yourself, your children, or your parents based on your financial strategy.
When an NRI moves to India, getting the best exchange rate is key. While exchange houses or money transfer services providers may be the most efficient and cost saving option for remitting smaller amounts (<$50k), for higher amounts, sending an international wire and negotiating a better rate with the bank's treasury could be the cheapest and fastest option. However, exchange rates fluctuate, and securing the best rate without direct access to the bank's treasury can be tough.
If you are returning to India or you have a ‘Not Ordinary Resident' tag to your profile, strategic investment planning can minimize tax liability. Consider timing asset sales, managing ESOPs/RSUs, and addressing retirement fund restrictions. Also, booking the profits before becoming an 'Ordinary Resident’ may offer benefits under DTAA.
Advisory
We innovate systematically, continuously and successfully.
Performance is about solving problems and building business.
We are a full service business solutions provider.