NRIs Returning to India From UAE: Tax and Investments Guide

An NRI returning to India from the UAE can be due to many reasons, such as economic, professional, or family reasons. However, moving back to India is not just about buying a plane ticket.

It includes a lot of documentation, tax implications for NRIs, managing foreign investments, and bank accounts in India. 

In this, we will guide you on how to safely return to India from the UAE while managing all your residential status and NRE/NRO accounts in India. 

Why NRIs Move Back to India From the UAE

Here are some of the reasons why NRIs decided to return to India from the UAE: 

• Family Gatherings: Most NRIs return to India from the UAE due to family ties and raise their children with Indian roots and culture. 
• Living and Lifestyle: In India, NRIs can enjoy a unique lifestyle that allows them to enhance their skills and live happily with their loved ones. 
• Budget-friendly living costs: In India, NRIs can access education, healthcare, and other facilities at low cost, helping them save their hard-earned money. 
• Retirement Savings: NRIs can also plan their future retirement by investing in the Indian government retirement plans. 

Banking Needs for NRI Returning to India from the UAE

If an NRI returns to India from the UAE, they need to manage their NRE/NRO and FCNR bank accounts in India after obtaining residential status. 

An NRI needs to redesignate or close their NRE/NRO accounts in India, or open a residential savings account in India, as per the Reserve Bank of India (RBI) and the Foreign Exchange Management Act (FEMA). 

NRO Account: An NRI needs to convert their non-resident ordinary account into an Indian resident savings account after getting the resident status in India. 

NRE Account: When an NRI returns to India, he or she will not use their NRE account after getting resident status. So they need to convert their NRE account to an Indian savings account. 

FCNR Account: An NRI can hold the FCNR account till maturity. After maturity, you need to open a residential savings account and transfer all your money, or you can open an RFC account. 

International Bank Account: An NRI can hold international bank accounts opened while an NRI in a foreign country. However, to continue using the Account, you must comply with all Reserve Bank of India (RBI) rules and regulations and use it in India. 

Investment Management for the NRIs after Moving Back to India

NRIs returning to India from the UAE need to manage their foreign investments and assets in India, such as mutual funds, fixed deposits (FDs), demat accounts, and others.

 Mutual Funds: An NRI needs to link their Indian savings account to an NRI bank account to smoothly transfer all invested mutual funds into an Indian resident savings account after becoming an Indian resident. With it, you also need to update your KYC and provide all the bank details, including your Foreign Account Tax Compliance Act (FATCA/CRS) status.

Demat Accounts: An NRI needs to contact their broker or DP when returning to India from the UAE, and convert an NRI demat account into an Indian resident account or close the NRI demat account. 

All the securities which are held in your NRE/NRO demat account will not be the same as before because of the PIS permission, and conversion rules, and you need to contact your depository and do all the KYC and PIS formalities in compliance with SEBI/RBI rules and update the common reporting standard (CRS) in the UAE. 

Fixed Deposits (FD): An NRI must convert their NRE/NRO FD accounts into an Indian account. This will not affect taxation, and you will get the same interest rates as before under the applicable tax rates. 

Foreign Assets Investments: NRIs are allowed to hold their foreign investments, which they had purchased when they were an NRI, as per the Foreign Exchange Managnment Act (FEMA) regulations. 

To continue holding your foreign investments, you need to report all your foreign investments and assets on your Income tax return and follow all rules and regulations for the transfer of foreign assets and investments. 

There are different types of foreign investments, such as bank deposits, securities, and real estate. Furthermore, you need to always check for the updated FEMA/RBI guidelines. 

Tax Implications of an NRI Returning to India

When an NRI returns to India from the UAE, they change residency status, which affects their tax liability.

Here are some of the conditions given below which will determine whether you will be considered a non-resident of India or a resident of India. If you meet all the conditions, you will be viewed as a resident of India; if you do not, you will be regarded as a non-resident of India. 

• If your stay in India exceeds 182 days in a financial year. 
• If you stay in India for more than 60 days in a financial year or 365 days in the last 4 years. 

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

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

→ A deemed resident does not need to pay any tax in any other foreign country to become a resident in India, if their Indian income is more than 15 lakhs INR, according to section 6 (1A)

After knowing your residency status in India, you need to further determine whether you are a Resident and Ordinarily Resident (RNOR) or a Resident and Not Ordinarily Resident. 

Here are some of the eligibility conditions given below. If you meet those conditions, then you will be considered an RNOR, and if you fail to meet those conditions, then you will be regarded as an ROR. 

1. First Condition

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

2. An Indian Citizen or an Indian Origin visited India during the financial year

• He or she should have an Indian income source 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: After 2 or 3 years, your status will be automatically converted from RNOR to ROR.

Here is the table given below, which will help you to check your taxability as an RNOR, ROR, or NR. 

DTAA Between India and UAE

As the UAE does not levy any personal income tax, but it does have VAT and corporate tax to protect against double taxation, India and the UAE have signed a Double Taxation Avoidance Agreement, which helps NRIs avoid paying double tax on the same Income. 

Here are some of the benefits of the DTAA: 

• DTAA allows a person to defer tax on the same income and helps them claim the tax credit against their domestic tax liabilities. 
• It provides tax exemptions in various situations, which is beneficial for persons engaged in business and trade. 
• DTAA also provides legal certainty on international income. 
• It also reduces the Tax Deducted at Source (TDS) rates on the dividends that you get in India. 

Common Challenges NRI Faces While Moving Back to India

Here is a list of some common challenges which an NRI faces when they return to India from the UAE: 

• An NRI may find it difficult to understand global income taxation.
• If an NRI forgets to apply for DTAA, he or she has to pay tax twice in both countries. 
• Due to missing or incomplete documentation, they may experience delays in banking and fund transfers. 
• Difficulty in understanding India's investment system. 

Final Thoughts 

Moving to India from the UAE can be a complex process for the NRIs, which cannot be done single-handedly because it includes a lot of documentation, taxation for the NRIs, and managing their banks and investments. 

So, for this, you can trust the Visament website. We have a team of experienced experts who know all the processes and documentation to manage NRIs' foreign investments and banking accounts when they return to India. 

We will ensure that we provide you with a well-planned structure to assist with all the financial planning and tax obligations when moving back to India from the UAE. For more information, you can contact our support team, who are ready 24/7 to help you address all your queries and doubts by visiting our Visament website.

Note: This guide is intended for general informational 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 losses arising from decisions made based on this content.