Returning Indian — Tax & FEMA Planning | Savlana Init

Transition Planning · Coming Home

Returning Indian — Come Home Without Losing Ground.

Two or three years of RNOR status, an RFC account, FCNR deposits that keep running and a Section 115H declaration. Used properly, the return home is the best-taxed period of your life.

A permanent return to India changes your position under two separate legal regimes on two different dates. Under the exchange control law you become a person resident in India from the date of arrival where you return for employment, business or an uncertain period — immediately, without waiting for any day count. Under the Income Tax Act status is decided by presence across the whole financial year, so you may well remain non-resident for tax in the year you arrive. The mismatch is normal and must be managed rather than resolved.

The tax side offers a genuine concession. Section 6(6) treats a returning individual as resident but not ordinarily resident where he was a non-resident in nine of the ten preceding financial years, or present in India for 729 days or less over the seven preceding years. During that period foreign income is generally outside the Indian net, and disclosure of foreign assets in Schedule FA does not apply. For someone who has been abroad for a decade, this typically yields two financial years and sometimes three — the window in which foreign properties should be sold, foreign portfolios rebalanced, and foreign retirement accounts examined.

The exchange control side offers instruments. On return, NRE balances may be transferred into a Resident Foreign Currency account, which allows foreign currency earned abroad to be held in India in foreign currency, remains freely repatriable and is available without restriction if you go abroad again. FCNR deposits may generally be held until maturity on existing terms. Section 115H of the Income Tax Act permits continued Chapter XII-A treatment on income from foreign exchange assets other than shares in an Indian company, by declaration filed with the return for the year in which you become resident. Each of these has a deadline, and each is lost by inaction rather than by any positive decision.

Our Returning Indian Services

Return Date Modelling

Analysis of your Section 6 position under alternative return dates, and of how each choice affects the length of the RNOR window that follows.

RNOR Window Mapping

Precise determination of how many financial years of not-ordinarily-resident status you hold, with a calendar of what must be completed within it.

Foreign Asset Disposal Planning

Sequencing of the sale of foreign property, securities and business interests while the gains remain outside the Indian net.

RFC Account Set-Up

Opening of the Resident Foreign Currency account and transfer of NRE and FCNR balances so foreign earnings continue to be held in foreign currency.

NRE, NRO and FCNR Redesignation

Timely redesignation of existing accounts on becoming resident under FEMA, with written intimation to every bank, broker and registrar.

Section 115H Declaration

Preparation and filing of the declaration preserving Chapter XII-A treatment on foreign exchange assets after you become resident.

Foreign Pension and Retirement Accounts

Treatment of overseas pensions, retirement accounts and social security receipts under domestic law, the relevant treaty and Section 89A where notified.

Post-Return Compliance

Advance tax, foreign tax credit through Form 67, Schedule FA once ordinary residence begins, and annual return filing thereafter.

Our Process

Pre-Return Review

Before you return, we map your foreign holdings, model the status outcome for the year of arrival, and quantify the value of the RNOR window.

Action Plan and Sequencing

Disposals, account changes, income timing and declarations are placed on a dated plan, with the items that must precede arrival identified separately.

Arrival Formalities

On arrival, accounts are redesignated, the RFC account is opened and funded, and status changes are notified to banks, brokers, employers and registrars.

RNOR Period Execution

Through the concessional years we execute the disposal and restructuring plan and file returns on the not-ordinarily-resident basis.

Transition to Ordinary Residence

Before ordinary residence begins we complete outstanding restructuring and set up Schedule FA disclosure and foreign tax credit procedures.

Why It Matters

✓Two to three years of RNOR status identified and actually used

✓Foreign property and portfolios sold before the Indian net closes

✓RFC account opened so foreign currency is retained, not converted

✓FCNR deposits carried to maturity on their existing terms

✓Section 115H declaration filed with the correct year’s return

✓Foreign pension and retirement income treated under the right article

✓Accounts redesignated on time, avoiding a FEMA contravention

✓Schedule FA and foreign tax credit set up before they are needed

Frequently Asked Questions

Under FEMA you generally become a person resident in India from the date of arrival where you return for employment, business or an uncertain period. Under the Income Tax Act, residence is decided by days present in the financial year, so you can remain non-resident for tax in the year of return while already being resident for exchange control. Both positions operate at once and each carries its own obligations.

An RFC account allows a person who has returned to India after being resident abroad to hold in India, in foreign currency, the funds and assets acquired while abroad. Balances are freely repatriable, there is no restriction on use, and the funds can be converted back to a non-resident account if you go abroad again. For most returning Indians it is the correct destination for NRE and FCNR balances on redesignation.

NRE accounts must be redesignated on becoming resident, and the balances are typically moved to an RFC account. FCNR deposits may generally be held until maturity on the contracted terms, with interest continuing to enjoy exemption while you qualify as resident but not ordinarily resident; on maturity the proceeds are usually credited to an RFC account. NRO accounts are redesignated as ordinary resident accounts.

Through Section 115H. Where a non-resident becomes resident in India, he may furnish a declaration along with the return of income for that assessment year, and the Chapter XII-A provisions continue to apply to income from foreign exchange assets other than shares in an Indian company until the asset is converted into money. The declaration must accompany that year’s return — it cannot be filed later.

While you are resident but not ordinarily resident, a foreign pension is generally outside the Indian net. Once you become ordinarily resident it enters the computation, though the relevant treaty article on pensions often allocates taxing rights to the source country, and foreign tax paid can be credited through Form 67. Section 89A additionally provides relief on income from notified retirement accounts held in notified countries, aligning the year of taxation.

Yes. Foreign currency, foreign securities and foreign immovable property acquired, held or owned while you were resident outside India may be retained, along with income and sale proceeds from them. The change is on the tax and reporting side: once you become ordinarily resident, worldwide income is taxable in India and those assets must be disclosed in Schedule FA of the return.

Returning to India for good?

Tell us when you plan to arrive and what you hold abroad. We will map your RNOR window, sequence the disposals and account changes, and file the declarations that preserve the benefit.