NRIs Returning to India from the Canada: Tax and Investment Guide

Living in Canada for several years and returning to India can be a tough challenge for NRIs. It is a very life-changing decision that can be driven by any reason, such as financial, professional, family, or emotional.

However, returning to India from Canada as an NRI requires a well-planned structure, including taxation, foreign investments, asset management, and bank account management. 

Through this blog, we will cover the tax implications, documentation, and other essentials for an NRI moving back to India.

Reasons for NRIs Returning to India From Canada?

Here are some points below that will help you understand why many NRIs are deciding to move back to India from Canada. 

• Family Gatherings: Most of the NRIs decide to move back to India from Canada to meet with their family members and close ones. 
• Living cost: India has a low living cost compared to Canada. An NRI moves back to India to get an affordable living in India, which can also help him or her to save money. 
• Retirement Planning: Many NRIs come to India to get an easy and simple lifestyle and plan their retirement in India and live with their family members.
• Career Opportunities: As India is a fast-developing nation, its economy is also growing rapidly, which allows NRIs to get jobs in various fields like It, healthcare, etc. 

Banking Needs for NRIs Returning to India from Canada?

When an NRI returns to India from Canada, he or she needs to manage their Indian accounts like Non-Resident Ordinary (NRO), Non-Resident External (NRE), and Foreign Currency Non-Resident (FCNR) accounts. 

As per the Reserve Bank of India (RBI) and the Foreign Exchange Management Act (FEMA) regulations, an NRI needs to re-designate their NRE/NRO accounts in India after returning, and open an Indian residential savings account or close their accounts.

NRO Account: An NRI needs to convert their NRO account into an Indian resident rupee account, or can close their NRO account after getting Indian residency status. 

NRE Account: You need to convert your NRE Account to an Indian residential savings account, so you can transfer the funds to an RFC account. 

FCNR Account: An NRI can hold their FCNR accounts in India until maturity. After maturity, you need to transfer it into an Indian resident savings account, which is maintained in rupeessor to an RFC account to keep your funds in foreign currency. 

International Bank Account: According to the RBI, you can continue to hold your international bank account in India, which you have opened when you were an NRI in a foreign country. Furthermore, to use your International bank account in India, you need to follow all the rules and regulations in the country. 

You also need to follow all the guidelines by the RBI and FEMA to hold your foreign assets and investments in India, and ROR should report all the foreign assets and investments in your ITR, like property, securities, and bank deposits. 

Investment Management of an NRI Moving Back to India

When an NRI returns to India from Canada, they need to manage and review their foreign investments and assets in India, which are taxable in India. 

An NRI needs to manage their investments like Mutual Funds, Demat accounts, and Fixed deposits in India. 

Mutual Funds: When an NRI returns to India, they need to link their NRI bank account with an Indian residential savings account to transfer all the mutual funds into the residential savings account. Furthermore, they need to update their KYC by providing all bank-related information, and Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standards (CRS) status. 

Demat Account: An NRI needs to convert their Foreign demat account to an Indian resident account or close their demat account when they get the Indian resident status, by contacting their broker/DP. 

All the securities that are held in the NRE /NRO account will not be the same as before due to the conversion rules, PIS permission, and SEBI/RBI regulations. Additionally, you also need to complete your KYC and update the Foreign Account Tax Compliance Act (FATCA) and do all PIS formalities by contacting your broker. 

Fixed Deposits: If you have a fixed deposit when you were an NRI, then you need to convert your NRI FD account to an Indian account after getting the new residency status. Converting your FD account in India will not impact the taxation. You will get the same tax and the same interest rates as before, and the applicable tax rates. 

Foreign Assets Investments: According to the FEMA guidelines, you can hold your foreign assets and investments in India after returning from Canada. 

However, there are some rules and regulations that you need to follow, and ROR must report their foreign investments and assets in the Income tax report (NR and ROR do not need to file ITR), such as bank deposits, property securities, and always check for the updated FEMA and RBI guidelines. 

Tax Implications of an NRI Returning to India

When an NRI returns to India from Canada, their Indian income will be taxed according to their residency status, which can be Resident of India or Non-resident of India. 

Here are the eligibility criteria through which you can see your residency status. If you meet the following conditions, then you will be qualified as a resident of India (ROI), and if you fail to meet the conditions given below, then you will be termed as a Non-resident of India (NRI). 

• If you stay in India for more than 182 days in a financial year. 
• If you stay in India for more than 60 days in a current financial year or 365 days in the past 4 preceding years. 

→ If you are a citizen of India, or Indian origin person who has left India for employment as a crew member on an Indian ship, then the above 60 days will be substituted by 182 days in a financial year. 

→ If you are an Indian citizen or Indian origin and your total Indian income is more than 15 lakhs INR, apart from all the foreign income sources, then the above 60 days will be exchanged for 120 days in a financial year. 

→ If you are an Indian citizen or Indian origin whose total Indian income is less than 15 lakh INR, apart from all the foreign income sources, then the above 60 days will be exchanged by 182 days in a financial year. 

→ A deemed resident is not liable to pay any taxation in any other foreign country to be a resident in India, if their total income is more than 15 lakhs INR according to section 6(1A). 

Now, the residency status is furthermore divided into 2 more statuses, that are Resident and Ordinarily Resident (ROR), and Resident but Not Ordinarily Resident (RNOR). 

Here are the conditions given below, which will help you determine your ROR or RNOR status. If you meet all the conditions, then you will be considered an RNOR, and if you fail to meet the conditions given below, then you will be considered an ROR. 

1. First Condition

• You must be a non-resident for 9 out of 10 previous financial years. 
• The number of stays in India should be less than 729 days in the last 7 years. 
• If you qualify for a deemed resident. 

2. An Indian citizen or an Indian Origin visited during a financial year

• They should have an Indian source of Income of more than 15 lakhs INR in a financial year. 
• The number of stays in India should be more than 120 days and less than 182 days. 

Note: You will be converted from RNOR to ROR within two or three financial years. 

Here is the table given below to see your taxation as NR, RNOR and ROR

DTAA Between India and Canada

Under the Double Taxation Avoidance Agreement (DTAA), an NRI can get their taxes paid in Canada. DTAA allows for the avoidance of paying taxes twice on the same income. 

Here are some of the benefits of DTAA: 

• Provides tax exemptions in one country. 
• Under DTAA, you can claim a tax credit in your country of residence. 
• You will get reduced tax rates for certain types of income. 

Common Challenges NRIs Face When Returning to India

Here are some of the common challenges which are faced by the NRIs while moving back to India from Canada. 

• NRIs can face difficulty while understanding global taxation. 
• Difficulty in understanding the Indian investment system. 
• If DTAA is not applied, then you have to pay the tax twice. 
• Due to the incomplete documentation, banking and repatriation can be delayed. 

Final Thoughts 

Returning to India after living for many years in Canada can be a complex process. It includes a lot of paperwork, managing foreign investments, assets, and tax implications. 

Doing all this alone can be a tough job, but wait, Visament is here to provide you with all the assistance while an NRI returns to India from Canada. We provide NRi with all the tax planning, converting bank accounts, managing foreign assets and investments in India and many more. 

For more information, you can contact the visament agents online who are ready 24/7 to help you with all your issues and problems. 

Note: This guide is for general purposes only. The views shared here are personal and do not represent the official position of Visament. Neither Visament nor the author shall be held liable for any direct or indirect loss arising from decisions made based on this content.