Good things apart, people should be prepared to face the unpleasant ones life throws at them. This is applicable in the case of NRIs as well. Today, they might be having a lucrative job and leading a flamboyant lifestyle but tomorrow? Who knows what’s going to transpire? In such a scenario it is difficult to accept the reality, but do they have any other option? So, if NRIs have to come back to India for good, then there are certain financial changes they should be prepared to face. Today, we will talk about the same.
Tax Matters Change Drastically
Being an NRI you enjoyed certain perks in terms of tax in India, but the moment you become an Indian resident you lose those, all of a sudden. To clarify with an example, the international incomes of NRIs do not come under the tax net in India as long as they stay abroad. However, the moment a person ceases to be an NRI, the taxation of his income also changes based on the present residential status.
NRIs coming back to India fall under two categories—resident and ordinarily resident (ROR) and resident but not ordinarily resident (RNOR). In case the individual remains in India for 182 days or more in that financial year (FY) or if he stays for 60 days or more in the FY and 365 days or more in the preceding four Fys then the person will come under ROR. As for RNOR, the person must either have the NRI status in nine out of 10 FYs before the appropriate FY or remain in India for 729 days or less in the seven FYs prior to the FY in question. A ROR has to pay taxes on his global income whereas an RNOR does not have to pay any cess on the same.
Equation Concerning Investments Also Changes
In case a person is returning to India forever after spending some valuable time overseas, then he should ideally liquidate his foreign assets, especially physical ones. There is no point in holding onto a foreign asset if the person is not returning overseas. If you own a property abroad, you can put it on rent, however, it would be tough to manage it remotely. So, renting the property could easily be avoided. But, it might not be in your best interest to dissolve assets like 401K, the retirement savings option given by employers in the US, due to the financial constraints and the mandatory lock-in period. So, an NRI can continue having such assets while in India but he or she must pay taxes for such incomes.
Change In Terms Of Insurance As Well
The other thing that NRIs need to be mindful of happens to be the insurance policy. The type of insurance that they opted for in a foreign country will no longer be applicable in India. Hence, after considering life and health insurance needs NRIs should choose one policy appropriately in India. It is advisable to go for a health family floater once the individual reaches India. With regard to life insurance, opt for a term plan, which offers optimum coverage at a frugal cost.
So, NRIs should plan for these changes in advance ie well before coming to India. If they are not able to manage these things on their own, then assistance can be solicited from experts. Therefore, NRIs must be ready to tackle these changes once they return to their native places.
