Call Us

FOR EXISTING POLICY

Have query on premium, payout or any servicing need?

Call us:

1 860 266 9966

Monday - Saturday | 10 am - 7 pm IST

Call charges apply

Dedicated NRI Helpdesk:

+91 22 6251 9966

Monday - Saturday | 10 am - 7 pm IST

Call charges apply

FOR NEW POLICY

Want to buy a new policy online?

Call us:

+91 22 6984 9300

Give missed call for a call back:

+91 11 6615 8748

Monday - Sunday | 8 am - 11 pm IST


Exclusively for NRIs:

Call us:

Give missed call for a call back:

+91 11 4473 0242

Monday – Sunday | 9 am – 9 pm IST

Language

Need assistance in choosing the right insurance plan? Get a call from our Expert.

Need assistance in choosing the right insurance plan?Get a call from our Expert.

+91 dropdown arrow

Select Plan dropdown arrow
  • Term plans
  • Saving plans
  • Wealth plans
  • Retirement plans
  • I don't know/I need help

TATA AIA Life Insurance Co. Ltd will send you updates on your policy, new products & services, insurance solutions or related information. Select here to opt-in. T&C apply.

Tax Planning and Tax Rules for NRIs Returning to India

Nowadays, it has become common for Indians to gain NRI status and work and live outside the country. However, you may return to your motherland after spending some years abroad.
 

Returning to India requires meticulous financial planning, including tax* planning and planning for investments like an NRI insurance policy. To help NRIs with this, the Reserve Bank of India has issued clear guidelines for various financial matters for NRIs who plan to stay abroad or return to India. 
 

Generally, the tax provisions for NRIs who plan to return to India are generous. However, you must clearly understand the NRI taxation, and tax planning for NRIs, if you plan to return to the country. 
 

Read further for complete information on tax planning and tax rules for NRIs planning to return to India.

NRI Definition Income Tax Act

Usually, a person working abroad is understood as an NRI. However, this does not hold for how the Income Tax Act defines an NRI. The term "Non-Resident" means that the concerned person does not reside in India on a permanent basis. NRIs typically hold Indian citizenship or are of Indian origin but have obtained citizenship of another country.
 

NRIs maintain connections to India and can invest in the country and be a part of the cultural activities here. Therefore, there are clear provisions for the taxability of NRIs in India.
 

It is essential to understand who falls under the NRI category for taxation purposes. As per the section 6 of the income tax law, an individual falls into either of these 3 categories:
 

  1. Non-resident

  2. Resident but Not Ordinary Resident in India (NOR)

  3. Resident and Ordinary Resident in India (ROR)
     

Non-resident: An individual is said to be Non-Resident in India if he is not a resident in India. According to the Finance Act, 2020, w.e.f., Assessment Year 2021-22 an individual is deemed to be resident in India in any of the previous years if he satisfies any of the following conditions: 
 

  • If he is in India for a period of 182 days or more during the previous year; or 

  • If he is in India for a period of 120 days or more during the previous year and 365 days or more during 4 years immediately preceding the previous year.
     

NOR: According to Section 6(6)(a) of the Income Tax Act, an Individual is considered a NOR for a particular financial year he is returning to India and the succeeding 2 years if:
 

  • He has been a non-resident Indian in 9 out of 10 years preceding that year; or

  • He has been in India for a period of 729 days or less during the 7 financial years preceding that year.
     

Your NRI status is considered a NOR status for 2-3 years after you return to the country. After this, your status is that of a ROR and the taxation rules applicable to all resident Indians will be applicable to you as well.

Non-resident Indian Income Tax Planning and Rules

On returning to India, once your NOR status converts to a ROR status, you will lose several tax benefits applicable to NRIs and NORs. Therefore, you must do your tax planning before the status change happens. Some of these tax benefits a NRI or an NOR enjoys are:
 

  • Tax exemption on capital gains earned outside India on fixed or financial assets held abroad.

  • Tax exemption on interest received from Foreign Currency Non-resident and Resident Foreign Currency deposits.

  • Tax exemption on a withdrawal or pension from a pension scheme/ retirement account held abroad.

  • Tax exemption on interest or dividends earned on deposits/ securities held abroad.

  • Tax exemption on rental income earned on a property held abroad.  
     

An NRI’s income earned in India is taxable in the country. However, the income earned abroad is not liable to tax in India. 
 

Income earned outside India by an NRI or a NOR in a given financial year and remitted to India during the same year is not taxable in India.

What Happens When I Lose My NRI/ NOR Status?

Once an NRI returns to India, his status changes to NOR, which changes to ROR after a few years. Till you enjoy the NRI/ NOR status, you can benefit from the Double Tax Avoidance Agreement that India has with over 75 other countries globally.
 

However, once your NRI status changes to ROR, you will not be eligible for the returning NRI taxation benefits under DTAA. Moreover, even your global income will be taxable in India henceforth. 
 

As part of your income tax planning, if you plan to sell a property you own abroad or withdraw from an overseas retirement account, it is advisable to do it before your status changes to ROR. It will help you avoid paying taxes on it in India.

Tax Regulations and Implications for NRIs Returning to India

Account Type

RBI Guidelines

Income Tax Provisions

NOR Deposits

Should be converted to resident accounts

Taxable. TDS applicable as NRI till the NRO status existed. Now as per the resident.

NRE Deposits

Should be converted to resident accounts or funds to be transferred to RFC.

Taxable as an NRE account cannot be held as a resident.

FCNR Deposits

Can be maintained till the deposit matures. After that, it should be converted to resident accounts or funds to be transferred to RFC.

Tax exempted till NRI has NOR status after returning.

Resident Foreign Currency Account (RFC)

NRE and FCNR deposits and foreign inward remittances to be received in this account.

Interest income is exempted from tax till NOR status remains.

What Should an NRI Do on Returning to India?

  • Inform the financial institution and convert your NRE/FCNR account to a resident account. 

  • Similarly, get your status updated as a resident for your mutual fund investments and open a resident demat account to transfer shares from the existing NRI demat account, if applicable.

  • An NRE FD can be converted into a domestic resident FD for the same interest rate.

Can NRIs save Income Tax in India With NRI Life Insurance Plans?

NRIs can purchase an NRI insurance policy to get tax benefits along with life coverage benefits to secure their loved ones even when they do not stay in India. An NRI can avail of tax benefits in the following 2 ways with an NRI life insurance plan:
 

  • Deduction under Section 80C: Deduction of up to ₹1.5 lakhs under Section 80C of the Income Tax Act, 1961, for the premium paid towards NRI life insurance plans. 

  • Tax-exempt proceeds: The maturity amount or death benefit received from an NRI life insurance plan is tax-exempt under Section 10(10D) of the Income Tax Act. 
     

You can buy a Tata AIA life insurance policy through a quick, digital process. Conveniently purchase from overseas and enjoy a life cover for up to 100 years, along with tax benefits. 
 

However, as the tax laws can change at any time, it is advisable to consult with a tax advisor or financial professional to stay up-to-date with the latest tax provisions based on your circumstances.

Wrapping Up

An NRI is not liable to pay tax on income earned outside India. However, an NRI returning to India gets a NOR status, eventually converted to a ROR status. A resident Indian is liable to pay tax on global income under the income tax laws. Therefore, one must understand the taxation implications when returning to India.

Your Life, Your Legacy: Life Insurance Inquiry for Indians Abroad

+91 dropdown arrow
  • +93 Afghanistan

TATA AIA Life Insurance Co. Ltd will send you updates on your policy, new products & services, insurance solutions or related information. Select here to opt-in.


 

Looking to buy a new insurance plan?

Our experts are happy to help you!

+91

Select plan
  • Term plans
  • Saving plans
  • Retirement plans
  • Wealth plans
  • I don't know/I need help

TATA AIA Life Insurance Co. Ltd will send you updates on your policy, new products & services, insurance solutions or related information. Select here to opt-in

People Like You Also Read

NRI Capital Gains Tax: Understanding Tax Implications on Capital Gains
Read More
Why is SIP for NRI ideal for investing in Indian Mutual Funds? Tata AIA
Read More
Pension Plans for NRIs in India: Everything You Need to Know
Read More
Things NRIs in India Should Know About Term Insurance
Read More
Should NRIs Purchase Life Insurance in India? Explained
Read More
How Can Nris Invest In Mutual Funds
Read More
Pensions Plans for NRI in India: The Detailed Guide
Read More
Know About TDS Implications for NRIs Without PAN
Read More
Do Nris Have To Pay Tax On Pf Withdrawal
Read More

People Like You Also Read

NRI Capital Gains Tax: Understanding Tax Implications on Capital Gains
Read More
Why is SIP for NRI ideal for investing in Indian Mutual Funds? Tata AIA
Read More
Pension Plans for NRIs in India: Everything You Need to Know
Read More
Things NRIs in India Should Know About Term Insurance
Read More
Should NRIs Purchase Life Insurance in India? Explained
Read More
How Can Nris Invest In Mutual Funds
Read More
Pensions Plans for NRI in India: The Detailed Guide
Read More
Know About TDS Implications for NRIs Without PAN
Read More
Do Nris Have To Pay Tax On Pf Withdrawal
Read More
Website Logo Image Icon

Tata AIA Life Insurance

A joint venture between Tata Sons Pvt. Ltd. and AIA Group Ltd. (AIA),  Tata AIA Life Insurance  is one of the leading life insurance providers in India. We post everything you need to know about life insurance, tax savings and a variety of lateral topics such as savings and investments in this space. You can access and read a host of different blogs, articles and pages at the Tata AIA Life Insurance Knowledge Center or get in touch with us with any queries or questions!

View all posts by Tata AIA Life Insurance

FAQs

What will be the status of my NRI bank account once I return to India permanently?

Your NRI bank accounts will be converted to resident bank accounts and will be subject to interest earnings and taxations applicable to resident Indians.

Can I get benefits under the provisions of DTAA once I lose my NRI status?

You can continue benefiting under the DTAA provisions till your NRI status remains a NOR status. Once the NOR status converts to a ROR status, you cannot avail of these benefits. 

For how long can I maintain my NRI account after returning to India?

Once you return to India permanently, Your non-resident status becomes invalid and you become a resident Indian. Therefore, you must inform your financial institution and get your NRE and NRO accounts converted into resident accounts within a reasonable period. Failure to do so can be considered as a violation of FEMA.

Disclaimer

  • Insurance cover is available under the product.

  • The products are underwritten by Tata AIA Life Insurance Company Ltd.

  • The plans are not a guaranteed issuance plan, and it will be subject to Company’s underwriting and acceptance.

  • For more details on risk factors, terms and conditions please read sales brochure carefully before concluding a sale.

  • This blog is for information and illustrative purposes only and does not purport to any financial or investment services and do not offer or form part of any offer or recommendation. The information is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.

  • Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company.

  • Every effort is made to ensure that all information contained in this blog is accurate at the date of publication, however, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.

  • Tax: *Income Tax benefits would be available as per the prevailing income tax laws, subject to fulfilment of conditions stipulated therein. Income Tax laws are subject to change from time to time. Tata AIA Life Insurance Company Ltd. does not assume responsibility on tax implications mentioned anywhere in this document. Please consult your own tax consultant to know the tax benefits available to you.