What should an NRI do with their money when returning to India?
In the first 90 days, fix your status, your accounts and your cover before you make any new investment. Tell your bank you are now a resident, change your KYC, list everything you hold abroad, and close any gap in your health insurance. Decisions about what to buy can wait until that is done.
Two sets of rules change on different clocks. Under FEMA, which governs bank accounts and investments, you become a resident as soon as you come back to live and work in India. Under income tax, your status depends on the days you spend in India in each tax year. So you can be a resident for your bank on day one and still be taxed as an RNOR for two or three years.
What is RNOR status and how does it change what gets taxed?
RNOR, resident but not ordinarily resident, is a halfway status that keeps most of your foreign income out of Indian tax for the first few years after you move back. It is set by the residence rules in section 6 of the Income-tax Act, 2025, which kept the structure of the old Act.
You are resident in a tax year if you spend 182 days or more in India, among other tests. You are then RNOR rather than ordinarily resident if, broadly, you were non-resident in nine of the previous ten years, or spent 729 days or fewer in India in the previous seven. Most people returning after a long stint abroad meet one of these for two or three years.
What is taxed in India under each status
| Non-resident (NRI) | Resident but not ordinarily resident (RNOR) | Resident and ordinarily resident (ROR) | |
|---|---|---|---|
| Salary and income earned in India | Taxed | Taxed | Taxed |
| Foreign salary, interest, dividends and gains, kept abroad | Not taxed | Generally not taxed | Taxed, with credit for foreign tax paid |
| Foreign income from a business controlled from India | Not taxed | Taxed | Taxed |
| Report foreign assets in Schedule FA | No | Generally no, check that year's return form | Yes, every year |
A simplified view. Your exact status depends on your day counts, so have it worked out for each year.
What happens to NRE and NRO accounts when you return to India?
They must be redesignated as resident accounts once you become a resident, and NRE money can move into an RFC account if you want to keep it in foreign currency. FEMA does not let a resident keep operating an NRE or NRO account.
- NRO savings account. Becomes an ordinary resident savings account. Its interest was always taxable and still is.
- NRE savings account. Becomes a resident savings account, or the balance moves to a Resident Foreign Currency (RFC) account. The interest stops being tax-free once you are resident for tax.
- RFC account. Lets a returning Indian hold foreign currency brought back from assets acquired abroad, without converting it to rupees. It suits money you expect to spend abroad later, such as a child's overseas education.
- NRE and FCNR fixed deposits. Many banks let these run to maturity. Ask your bank how it will treat interest after you return, since practice differs.
- Demat and PIS accounts. Shares bought as an NRI sit in an NRE or NRO demat. Ask your broker to move them to a resident demat and close the portfolio investment scheme link.
Banks generally expect you to tell them soon after you return. There is no single day count everyone agrees on, so do it in your first month and keep the bank's acknowledgement.
What should returning NRIs do with a 401(k), pension or foreign shares?
You do not have to sell or bring them back: FEMA lets you keep foreign assets you bought while you were non-resident. What changes is tax and reporting.
Foreign retirement accounts
Without relief, growth inside a 401(k), IRA, UK pension or Canadian RRSP could be taxed in India every year while it is still locked up abroad. The Income-tax Act, 2025 carries forward the relief that lets you pay Indian tax only in the year you withdraw, so the two countries tax the same money at the same time. It applies to accounts in notified countries, which include the US, UK and Canada, and only if you opt in through the prescribed form with your return. The choice cannot be undone.
Withdrawing early to bring the money home often triggers a foreign penalty as well as tax. Work out the cost before you cash out.
Foreign shares, funds and bank accounts
- Keep a list now, with the date and cost of each purchase. You will need it for capital gains later.
- Report them in Schedule FA once you are resident and ordinarily resident. The Black Money Act carries a ₹10 lakh penalty for each year a resident leaves out a foreign asset. Since 2024 that penalty does not apply to foreign financial assets, other than property, worth up to ₹20 lakh in total.
- Gains on foreign shares are taxed like unlisted shares in India: long-term after 24 months at 12.5%, short-term at your slab rate. Our capital gains calculator shows the difference.
- Claim credit for tax already paid abroad, so the same income is not taxed twice.
Do returning NRIs need to update mutual fund KYC?
Yes: change your status from NRI to resident with your KYC agency and every fund house or platform, and move your bank mandate to a resident account. Until you do, tax may be withheld at NRI rates on redemptions, and new purchases or SIPs can be rejected.
- Update your address, phone number and tax residence in KYC.
- Replace the NRE or NRO bank account on each folio with your resident account.
- Check whether any old folios were in regular plans bought through a distributor abroad. Our Portfolio X-ray shows overlap and the plan type of every fund you hold.
- If you could not invest in some funds as an NRI from the US or Canada, those limits end once you are resident.
Do returning NRIs need new health and life insurance in India?
Usually yes, and health cover is the urgent one, because cover from a foreign employer ends when you leave and a new Indian policy has waiting periods. Pre-existing conditions are typically covered only after a waiting period of up to three years, so the earlier you start, the earlier that clock runs out.
- Health. Buy a family floater with a sum insured that fits private hospital costs in your city. If your new Indian employer gives group cover, keep a personal policy too, since group cover ends with the job.
- Life. A term policy bought abroad may still be valid, but check it pays out if you live in India. If you have dependants and loans, an Indian term plan is simple to add.
- Avoid insurance sold as investment. Returning NRIs with cash to invest are a common target for long lock-in plans.
Our insurance planning guide shows how much cover is enough.
A 90-day checklist for NRIs moving back to India
Weeks 1 to 4
- Tell each bank you are now a residentRedesignate NRE and NRO accounts. Decide what goes into an RFC account.
- Buy health insuranceStart the waiting periods now. Do not wait for an employer policy.
- Record your arrival dateYour tax status for the year turns on your days in India. Keep your passport stamps and tickets.
Weeks 5 to 8
- Update KYC and foliosResident status, address, phone and bank account on every fund and demat account.
- Move demat holdingsFrom NRE or NRO demat to a resident demat, and close the PIS link.
- List every foreign assetAccounts, shares, funds, retirement accounts and property, with purchase dates and costs.
Weeks 9 to 12
- Work out your tax status for the next three yearsKnow when you move from RNOR to ordinarily resident, and plan sales of foreign assets around it.
- Decide on foreign retirement accountsOpt for withdrawal-year taxation where it applies. Do not cash out early without costing it.
- Choose a tax regimeOur regime calculator compares old and new for your salary.
- Only then, plan new investmentsSet goals in rupees and decide how much stays abroad. The tax planning checklist covers the year-end steps.
Where we fit, and where we do not
Invsify is a SEBI registered investment adviser (INA000020572). We are fee-only: our fee is ₹8,999 a year, fixed, and we take no commissions. We can help you decide what to keep abroad and what to bring back, rebuild your investments around goals in India, and check your insurance.
We do not file tax returns or give cross-border tax or legal advice. Working out your residential status year by year, opting into relief for a foreign retirement account, claiming foreign tax credit and filling in Schedule FA are a chartered accountant's job, and if you have income or assets in more than one country, a cross-border tax specialist is the better pick. Your bank handles the account changes under FEMA. Use them first, and bring us in for the investment plan.