What happens to the financial accounts of an NRI on return home?

Plenty of individuals travel and settle abroad while investing in financial assets in the home country. These financial assets can include property, selected equities and even hold an NRI bank account. Amongst the several options, the bank account has been the most favorable, due to its flexibility and convenience, amongst many other advantages.

However, an NRI can hold any of these NRI accounts, on the condition of their NRI status. In the event, the account holder returns home, the status and the functionality of the account will change. Here is how the NRI accounts are affected on return to India:

Change of NRI accounts status when returning to India: There are different types of NRI bank accounts available to an NRI. They include the NRO account, NRE account, and the FCNR account. Each of these accounts hasa different functionality, in addition to holding different forms of currency. They also have different restrictions and conditioning. When the account holder returns to India, the bank must be informed about the change in status, which in turn, will change each of the account’s functions and conditions. In the case of the NRO account, it will be converted back into the resident saving account. The NRE and FCNR account will get converted into the Resident Foreign Currency account.

Change of the NRI termed deposit when returning to India: On returning to the home country, the NRI’s termed deposits such as FCNR can be held until it matures. After maturity, the FCNR fixed deposit must be converted to the RFC account. However, the interest that is taxed on this account will depend on the status of the account holder, especially if he has stayed abroad for 9 years, in the previous 10 years, making him a resident, but not ordinarily resident status. If the account holder qualifies for this status, then the interest that is earned on the RFC account will be tax-free for the next 3 years.

Change of NRI bank accounts which holds foreign currency: NRI’s who hold foreign exchange on their return home, and wish to hold it without converting can opt for the Resident Foreign Currency account in India. Such an individual can open the account on condition that he or she must reside abroad for a continuous period of 1 year, before opening the RFC account. The RFC account can hold foreign currencies of the US dollar, Euro, Great Britain Pound and the Japanese Yen. This RFC account can be opened either in the form of savings account or a fixed deposit. The interest is taxed on this account unless the account holder qualifies for the RNOR status.


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