There are a few conventions that Indian expats should remember before starting their regular financial activities in their native country, as per a Gulf News Report.
Non-Resident Indians (NRIs) frequently have questions about their non-resident bank accounts, in particular their NRE accounts, in order to continue conducting business at home.
NRE accounts: A bank account created in India in the name of an NRI to deposit his overseas earnings is known as an NRE (Non-Resident External) account. However, a person’s NRE account is only valid while they are still living overseas.
As an alternative, an NRI might manage the money he earns in India by using an NRO (Non-Resident Ordinary) account, a bank account created in India in his name.
The NRE Accounts Of NRIs Returning To India
“According to Indian regulations (FEMA or the Foreign Exchange Management Act), the moment you return to India with the intention of staying there, you should inform the appropriate banks and re-designate the NRE account to a normal resident account,” said Dixit Jain, Managing Director at the Dubai-based tax advisory firm, The Tax Experts DMCC.
Technically, the day you return is when you officially become an Indian resident. This is the key reason why you should convert, re-designate, or shut your NRE account as soon as possible following the return since you can no longer retain NRI bank accounts or take advantage of the tax benefits on NRI investments.
According to Jain, failing to convert your NRE account within three months after the return would be viewed as a breach of the Foreign Exchange Management Act (FEMA) and may result in a fine.
How Long The Interest On NRE Accounts Will Be Tax-free After Repatriation?
Another typical question among NRIs is how long the interest would be tax-free after returning to India, and if he or she may keep the NRE account since the interest generated is tax-free for NRE accounts.
Only non-residents are exempt from paying taxes on interest received from NRE accounts under regulations. Any interest accumulated on your NRE account will be subject to tax as soon as you land in India.
However, according to experts, you might even choose to move your money from your NRE account to your RFC (Resident Foreign Currency) account once you return.