Moving back to India: what changes

Returning to India after years abroad changes your status for foreign exchange purposes almost immediately, and for tax purposes over time. Your loans do not disappear, but your lender, your bank accounts and your investments all need to be told. This guide covers what to do and when.

Two different "residencies"

It helps to separate two tests that are often confused:

FEMA residential status decides which bank accounts you can hold and how your property and loans are treated. You generally become a "person resident in India" under FEMA when you return to India for employment, business or any other purpose indicating an intention to stay for an uncertain period.
Income tax residential status depends on the number of days you spend in India in a tax year and in earlier years. Many returning NRIs are "resident but not ordinarily resident" (RNOR) for a year or more, which keeps foreign income outside the Indian tax net for that period.

Your bank cares about the first; your tax return about the second. Take tax advice before you move, especially on the timing of selling overseas assets.

Your Indian home loan

Your loan continues on its existing terms. You do not have to repay it because you have come back. What you should do:

Inform the lender in writing that your residential status has changed, with your new Indian address and contact details.
Update KYC with proof of your return and, if you have one, your new Indian employer's details.
Switch the EMI mandate to a resident savings account if it was linked to an NRE or NRO account, because those accounts will be re-designated.
Ask about pricing. Some lenders price NRI loans differently from resident loans. A change of status may allow you to ask for the lender's resident rate, or to consider a balance transfer. Any change is at the lender's discretion.

If you plan to take a new loan soon after return, lenders will usually want to see Indian income, or a continuing overseas income they accept, and may want a few months of salary history in India.

Your bank accounts

Under the FEMA Deposit Regulations, as summarised in professional commentary:

NRE and NRO accounts must be re-designated as resident accounts once you return for employment or for an uncertain period. Give your bank proof of your changed status. Interest on the NRE balance stops being tax-free from the date you become resident under FEMA.
FCNR(B) deposits may continue until maturity at the contracted rate. At maturity, the bank will convert them into resident rupee deposits or, if you are eligible, into a Resident Foreign Currency (RFC) account.
RFC account: a returning NRI can usually hold foreign currency brought back, including foreign earnings and pension, in an RFC account, free of restrictions on use abroad. Ask your bank about eligibility.

Do not leave NRE or NRO accounts running after you are resident. Banks and regulators treat this as a FEMA compliance issue.

Overseas assets and income

As a returning Indian, you can generally continue to hold, own and transfer foreign currency, foreign securities and immovable property abroad that you acquired while non-resident, and the income from them. Once you become ordinarily resident for tax, your worldwide income and foreign assets must be reported on your Indian tax return. [To verify against FEMA section 6(4) and current Income-tax schedules.]

Property in India

Property you bought as an NRI stays yours. If you later sell it, the repatriation rules for non-residents no longer apply because you are now resident; the proceeds simply go into your resident account. If you rent out property, rent now goes into your resident account.

Insurance, investments and other accounts

Tell mutual fund houses, depositories and insurers of your change in status; NRI investment accounts usually need to be converted.
Update your PAN records and Aadhaar if needed, and your address with the income tax department.
Review overseas loans: if you still owe money abroad, plan how you will repay it after you stop earning there.

A return-to-India checklist

Write to your home loan lender and switch the EMI mandate.
Re-designate NRE and NRO accounts; plan FCNR maturities; open an RFC account if useful.
Update KYC with banks, fund houses, depositories and insurers.
Take tax advice on RNOR status and the timing of overseas asset sales.
Keep records of foreign assets and income.

This is general information, not legal or tax advice. Your situation may differ; take advice from a qualified professional in India and the country you are leaving.