Managing Your Indian Bank Account After Returning From Abroad

Being an NRI repatriating to India, maintaining your bank accounts is one of the most important financial activities you’ll have to do. Being aware of NRI accounts versus resident accounts, shutting or changing accounts, and foreign currency deposits are crucial steps towards making a hassle-free transition of finances. In this blog, we’ll take you through how to maintain your Indian bank accounts and provide useful tips to avoid common pitfalls.

Table of Contents

Conversion of NRI Accounts to Resident Accounts

Once they are back in India, NRIs need to convert their Non-Resident External (NRE) and Non-Resident Ordinary (NRO) accounts into resident accounts since their NRI status has changed.

NRE Accounts: NRE accounts are utilized by NRIs to keep and manage foreign revenues. When they return, these accounts need to be closed down or converted into a Resident Foreign Currency (RFC) account or a normal savings account.
NRO Accounts: NRO accounts treat Indian income like rent or dividend. These have to be also converted into resident accounts, or you can carry on using the same, but the tax structure will alter. Converting the accounts in time is necessary for you to stick to the provision of the Foreign Exchange Management Act (FEMA) rules.

Open a Resident Foreign Currency (RFC) Account

For those NRIs coming back to India, it can be useful to keep some amount of money in foreign currency. The Resident Foreign Currency (RFC) account lets you keep your foreign currency earnings even after your return.

Currency Flexibility: RFC accounts permit you to keep money in foreign currencies like USD, EUR, GBP, etc., giving you flexibility if you are going abroad again or wish to benefit from exchange rate movements.
Tax-Free Interest: Interest on RFC accounts is tax-free for a certain period (based on your residency status), which makes it a good option for return NRIs. RFC account is an easy tool to handle your foreign assets while in India.

Handling Foreign Currency Deposits

Foreign currency deposits are generally held by NRIs in NRE or FCNR (Foreign Currency Non-Resident) accounts. After returning, the deposits have to be handled properly.

FCNR Deposits: These can be rolled over up to maturity without any tax consequences. On maturity, the amount can be shifted to an RFC account or a resident account.
Currency Conversion: If you are converting foreign currency to INR, monitor exchange rates to get the best returns. Planning and timing your foreign currency deposits will assist in preventing any unnecessary loss or tax burden.

Tax Consequences of Having Bank Accounts

Once you come back to India, your tax status gets changed, as do the tax implications on your bank accounts.

Interest on NRE Accounts: Interest accrued on NRE accounts is tax-free while you are an NRI. Once you get changed in status, interest is taxable.
NRO Accounts: Interest earned on NRO accounts is taxable, but relief under Double Taxation Avoidance Agreement (DTAA) is available if so. Knowing how your accounts will be taxed once you are back allows you to manage your finances better and escape penalties.

Repatriation of Funds

After returning to India, you can still have foreign income or assets that you would like to repatriate to India. Repatriation is the act of bringing funds from overseas countries to India.

Employing RFC Accounts: RFC accounts may prove to be beneficial in repatriating funds as they enable you to hold foreign currency.
Tax Implications: Repatriating funds should make you follow Indian taxation policies to prevent double taxation. Consulting a taxation expert may ease this for you. Repatriating funds is a difficult procedure, but having the necessary tools and information at your disposal can make it seamless and affordable.

Conclusion

Handling your Indian bank accounts upon your return from overseas needs to be planned carefully and followed as per rules. By converting your NRI accounts, utilizing RFC accounts, handling foreign currency deposits, and being aware of tax implications, you can make your financial transition a smooth one. Being well-informed and proactive can help you avoid possible financial distress and make your return to India a satisfying experience.

FAQs

What is the fate of my NRE account upon my return to India? Your NRE account needs to be transferred into a resident account or an RFC account according to FEMA rules.
Can I retain an NRO account on my return? Yes, you may retain an NRO account, but the interest accrued will be taxable.
What is an RFC account? An RFC (Resident Foreign Currency) account permits returning NRIs to keep foreign currency balances.
Is the interest on RFC accounts taxable? Interest on RFC accounts is exempt from tax for a specified period based on your residency status.
Can I repatriate money after coming back to India? Yes, you can repatriate foreign income to India through RFC accounts or other financial instruments.
What do I do with my FCNR deposits after coming back to India? FCNR deposits can be left till maturity, and the money can be shifted to an RFC or resident account.
Are NRE account profits taxable upon repatriation to India? Yes, when you are a resident in India, interest on NRE accounts is taxable.
Can I maintain INR and foreign currency in an RFC account? No, RFC accounts maintain only foreign currencies such as USD, EUR, or GBP.
Do I have to shut down my foreign bank accounts upon repatriation to India? No, you may retain your foreign bank accounts but you might have to report them in your Indian tax returns.
What is the process of converting my NRI account to a resident account? You must notify your bank and submit residency proof to convert your NRI accounts into resident accounts.

Disclaimer: The information provided here is for educational and informational purposes only and should not be construed as financial, legal, or tax advice. Consult with a qualified professional before making any investment decisions. We do not accept any liability for errors or omissions in this information nor any direct, indirect, or consequential losses arising from its use.Being an NRI repatriating to India, maintaining your bank accounts is one of the most important financial activities you’ll have to do. Being aware of NRI accounts versus resident accounts, shutting or changing accounts, and foreign currency deposits are crucial steps towards making a hassle-free transition of finances. In this blog, we’ll take you through how to maintain your Indian bank accounts and provide useful tips to avoid common pitfalls.