NRI Returning to India from Australia: Tax, Banking & Relocation Guide

Apart from changing locations, an NRI returning to India from Australia after spending years is a very big turning point. It is not only about changing countries, but also about transitioning emotionally, financially, and professionally. An NRI needs to prepare carefully when moving back to India, regardless of whether they have been living in Melbourne, Sydney, or Perth. An NRI (Non-Resident Indian) needs to consider several factors, including tax implications, financial considerations, and documentation. 

In this blog, we have mentioned all the answers to your questions for a smooth and well-planned transition when moving back to India from Australia. We have also provided a checklist for you after returning.

Why are NRIs Returning to India from Australia?

There could be various reasons for the NRIs to return to India, and it depends on the individual. Some individuals are attracted by family connections, while others may return because of professional opportunities and a feeling of belonging.

Here are some of the reasons behind an NRI returning to India from Australia:

• Developing Economy: Some individuals are drawn to India because of its fast-growing economy that offers numerous opportunities in startups, technology, and consulting.
• Reunite with families: It is considered one of the most common reasons for NRIs returning to India. Their major motive becomes to take care of their aging parents or raise their children in their cultural roots.
• Retirement Planning: Various NRIs decide to return for retirement to seek and enjoy tradition, familiarity, and a sense of belonging in their home country.
• Cost of Living: Although Australia offers a very high standard of living, expenses like education, healthcare, and housing are often less costly in India. The NRIs who have returned can maximize their savings while maintaining their quality of life and not compromising their comfort.

Understanding Your Residential Status After Returning

After you return to India, it is important to determine your residential status under the Indian tax law to plan all your finances smoothly. It will help you in understanding what income will be subject to taxation in India and the duration for which you can claim tax deductions on your foreign income. 

What is Tax Residency in India?

As per the Indian Income Tax Act, 1961, the residency status of an individual is determined based on the number of days they stay in India in a financial year. There are three possible categories:

• Non-Resident (NR): They are taxed only on the income earned or sourced in India.
• Resident but Not Ordinarily Resident (RNOR): Taxed on Indian and limited foreign income.
• Resident and Ordinarily Resident (ROR): Taxed on global income.

After your return, you may qualify as an Resident but Not Ordinarily Resident (RNOR) depending on your previous residential history. This status offers a transition period where your foreign income is not immediately taxed in India.

Key Rules and Timelines

You will be considered a resident of India if you stay:

• in India for 182 days or more during a financial year, or
• 60 days or more in the current year and 365 days or more over the preceding four years.

How do the Rules Apply to NRIs in Australia?

You must have been paying taxes in Australia if you were living and working there. The India-Australia DTAA can make sure that you are not being taxed twice on the same income. 

You can claim a foreign tax credit for the taxes you have already paid in Australia after becoming an Indian resident.

Tax Residency Rules for Returning NRIs

After coming back to India, the tax implications for an NRI can get complex, especially if they hold property, investments, or superannuation in Australia. It is important to understand how your income will be taxed to plan better and avoid any future surprises.

Use of DTAA Between India and Australia

The DTAA between India and Australia saves you from being taxed two times on the same income in two different nations. If you have already paid taxes in Australia on your superannuation and property rental income. Then, you can claim the amount as a tax credit while you fill out your Indian returns.

This agreement is essential in reducing the financial burden for returning NRIs and ensuring compliance with the tax systems of both nations.

What Happens to Your Foreign Assets After Returning to India?

During your RNOR period, income you earn from overseas will remain exempt from taxation in India. It includes salary, rental income, or pension from Australian property. However, once you get the ROR Status, your foreign income will be taxed under Indian law.

It means that if you own a rental property in Melbourne or have investments in the Australian stock market, then you will have to declare the generated income, and it will be taxed in India once your RNOR period concludes.  

Managing NRE, NRO, FCNR, and RFC Accounts After Returning

When you become a resident Indian:

• You need to convert your NRE (Non-Resident External) and FCNR (Foreign Currency Non-Resident) accounts into Resident Rupee Accounts. 
• NRO (Non-Resident Ordinary) accounts can still be kept open for Indian income, such as rent or dividends.
• You can open a Resident Foreign Currency (RFC) account if you want to hold foreign currency, such as AUD or USD.

An RFC account is usually necessary if you wish to save funds for future requirements or travel in Australian Dollars.

Bringing Money Back to India: Repatriation Rules

You need to follow both the Indian and Australian financial rules while repatriating funds from Australia to India. You must use official channels like SWIFT transfers via authorised banks to transfer funds.

Tips to follow while Repatriating Funds

• To simplify the documentation, you need to complete major transfers before your residential status changes to 'Resident'. 
• You must keep detailed records of your transactions, source of funds, and tax filings. You require these to ensure compliance as well as during Indian tax assessments.

Post-Return Checklist for Tax and Compliance

Here are the things you must do after returning to India:

• You need to convert your NRE/NRO/FCNR accounts to resident accounts.
• Report any foreign assets if you qualify as an ROR.
• Update your PAN card, KYC details, and Aadhaar across all institutions.
• Inform banks, employers, and the tax department about a change in your residential address
• Start planning your first Indian tax filing as a returning resident.

Conclusion

It can be quite exciting as well as overwhelming to get back with your family and come back home after spending many years in a foreign country. It might take some time to adjust to lifestyle, bureaucracy, and cultural nuances. But with this checklist, you can easily navigate this transition. Make sure to take all the important steps before and after moving back to India. It ensures compliance, and you can enjoy a hassle-free return to India. 

Furthermore, you can take help from our team of experts at Visament. They are dedicated to assisting the clients with their issues. You can manage all the complexities of returning to India from Australia, such as converting your bank accounts, determining your residential status, passports, and more.