Important Points for Returning NRIs/ PIOs

May 9, 2020

The following points are very important for Non-Resident Indian (NRI) /Persons of Indian Origin (PIO) who are coming back permanently or planning to stay back in India for an indefinite period:

1. NRE deposits become taxable from the day you land back in India. This is because NRE deposits are tax-exempt for NRIs (as per FEMA). Anyone planning to settle back or stay back for an indefinite period becomes a resident in India immediately, as per FEMA. The NRE deposits should be marked as Resident or moved to RFC (Resident Foreign Currency Account) ideally within 3 months.

2. FCNR deposits/RFC deposits and any international income is tax-exempt till the time you are an NRI (as per Income Tax Act) in 9 out of the last 10 years or been in India for less than 729 days in the last 7 years. In simple terms, a person who has been an NRI for more than 10 years at a stretch, might get another 2 years to enjoy this. This intermediate phase is also called RNOR (Resident but Not Ordinarily Resident).

3. Once a returning NRI becomes a Resident and Ordinarily Resident (ROR), all his domestic and international income is fully taxed.

The following strategy would help in managing personal finances:

1. Plan to move to India post-October of any year to enjoy one additional year as an NRI as per IT Act. However, if you have stayed in India for more than 365 days in the last 4 years then plan to come back to India only after February.

2. Restrict the taxable income in India by using tax-efficient options like RFC and FCNR during the RNOR (intermediate) phase. Also, one could look at exploring investments in tax-efficient mutual funds during this phase. It could be noted that debt mutual funds would be taxed at concessional tax rates if the units are held longer than 3 years.

3. Restrict income from taxable Fixed deposits and any other taxable incomes (like rentals) so that they are below Rs 6.50 lac per annum.

4. Use tax-saving deductions like Section 80C (maximum Rs. 1.50 lac per annum) to bring the taxable income to below Rs 5 lac (there is no tax for income below Rs 5 lac).

5. Invest extra funds in tax-efficient options like debt mutual fund (for conservativeness) and equity mutual funds and gold products for aggressiveness, based on your risk appetite.

The portfolio construct should balance safety (through FDs, RFC, FCNR), liquidity (through savings account/liquid mutual funds), growth (through equity and gold) and tax efficiency.

Equity and gold allocation should be between 25 to 35% of your entire financial wealth based on one’s risk taking ability. Invest this portion gradually. Regular income should be managed by FDs, RFC and FCNR. You could also look at rental income and gradual withdrawals from debt funds to increase your regular income. However, do not get over exposed to real estate as it is an illiquid asset.

Invest in appropriate insurance covers like health, house and any vehicle insurance. In case, there is a need for life insurance, buy a pure term plan. Traditional, ULIP and Pension Plans of Insurance companies are easily avoidable.

Have a proper nomination and a registered will so that your wealth is easily transferred to your dependents.


1. Market linked investments like Mutual Funds and Equity share investments are subject to market risks. Kindly read the scheme information documents carefully before investing.

2. All other investments too have different levels of risk like credit risk, regulatory risk etc. Appreciate this before initiating any investments.

3. Past performance of any asset class is not an indicator of future performance.

4. It is very important to consult a Professional Planner/Investent Adviser while implementing any of the above ideas.

5. The above are mere suggestions and not Investment Advice as individual cases might differ.




By Naveen Julian Rego
Naveen Julian Rego is a certified financial planner.
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Comment on this article

  • Dr Narayana Kilarkaje, Mangalore

    Sun, May 10 2020

    I think and now firmly believe that it is better to go for FDs in nationalized banks or top banks like HDFC although they give modest returns. In near future, when the Govt requires money, the rate of interest may be increased by a point. If your money is not immediately needed and you are willing to wait for 5 years, it is better to invest in NSCs in post office, which is the safest. As of now, MSc returns works out to be 8.5 percent. When NRIs return for good, they better find a small. Job which pays them just enough money for monthly expenses so that they don't have to spend from their savings. If you are very young, you can also invest in national pension scheme which will take care of your retirement. The NPS gives good returns and it's safe. PPF can also be an option to invest 1.5L per year to save tax.

  • Veer, Nagpur

    Sun, May 10 2020

    Is there any scheme in India to invest in securities, stocks, mutual funds, bonds etc in US dollars/foriegn currency in BSE????? . Even the present rupee FD rates can not catch up with declining rupee hence the value of rupee is lower than at the time of investment or same at the end of the term with interest without any gain compared to US dollars/ international markets. NRIs can not hold on to rupee for investment as its value declines substantially and in the event all the capital gains is nullified as rupee loses its value. Now for sometime it's going to be a double blow rupee being devaluing plus down trend in markets. So kindly advice what is the best alternate for NRI and foriegn investors to maintain thier initial capital value????.....

  • cornelio sunil, Qatar

    Sun, May 10 2020

    A good helpful advice, Please keep writing ,so that hard earned money of our sisters and brothers will be timely saved and do not have unscrupulous hands. Only few give genuine money saving Ideas ,but majority of them will take you for a jolly ride on the back of you. Please also keep writing/blogging on different tax savers scheme, Health Insurance policy's , and money saver plans. Gone are are the days one could look forward for a cozy retired life, You will not know what is store in future ,with all the down turns and diminishing job markets, Time only can tell, These days you cannot trust any one , people are still falling in prey for all the co-operative banks, A few months back 3 banks went bust in Mumbai, and very educated people lost their life savings. A year back, travelling on a Maharashtra road transport public bus, I striked a conversation with an old man, in his mid seventies, who used to work for one of silver refiners and ornament maker in heart of mumbai, Who put all his money in the bank , started by his worker association and lost his entire life savings,
    In Qatar, in year 2013, I had talk with engineers from the country Cyprus who where working here (They are brilliant civil engineers) , Due to the economic down turn ,that year (Fall of Greece economy) , suppose you had ten lakhs in Bank, the government takes 9 lakhs and gives you only 1 lakh for your sustaining , Horrible stories where told , about the increase in prices of daily food material ,where in pensioners could not buy daily food .
    We need to inculcate the art of saving and investing, so that we can have a place to fall back in our troubled times and economic down turn.
    I get very troubled when I get to see financial planners ,who financially plan them on the behest of the customers , i see insurance agents who take people for a ride , why all this cheating ?? when you know you must live and let live .

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