Planning to Return to India? A Tax Strategy That Worked

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Planning to Return to India? A Tax Strategy That Worked

Category: Returning NRIs

Planning to Return to India? A Tax Strategy That Worked

For most NRIs, returning to India after years abroad is not just a personal decision—it’s a financial event. From changing tax residency to converting bank accounts and declaring foreign assets, your financial life undergoes a complete reset. While the emotional pull of coming home is strong, failing to plan your return can create tax burdens, compliance gaps

This blog walks you through the story of an NRI who planned their return well—and the strategy that helped him avoid double taxation, maintain financial flexibility, and transition smoothly into Indian residency.

🎯 Rohit’s Story: A Planned Return from the U.S.

Rohit, a 42-year-old software architect based in California, decided to return to Pune with his family after 12 years abroad. He had a home loan in India, mutual funds in the U.S., an NRE fixed deposit, and plans to start a consultancy in India. Instead of waiting until the last minute, Rohit began planning his financial transition nine months before his return.

Here’s the smart tax strategy that worked for him—and could work for you.

1. He Timed His Return Right: The 182-Day Rule

Tax residency in India depends on how many days you spend in the country in a financial year. Rohit ensured his flight to India was scheduled after April 1, so for the Indian financial year (April to March), he remained a Non-Resident (NR). This meant that his global income was not taxable in India for that year, even if he returned in early April.

👉 Why this matters: Coming back in February or March would have made him a Resident and Ordinarily Resident (RNOR) earlier—bringing all his foreign income under Indian taxation immediately.

2. He Used the DTAA to Avoid Double Taxation

Rohit continued to file his U.S. tax return even after moving, since his foreign income was still active for part of the year. He declared his rental income from India and claimed credit for Indian TDS under the India–U.S. Double Tax Avoidance Agreement (DTAA).

This allowed him to avoid paying tax twice on the same income—a mistake many NRIs make in their transition year.

3. He Converted His Accounts Gradually

Once he returned and his status officially changed to Resident, Rohit converted his NRE and NRO accounts to Resident accounts. He also opened an RFC (Resident Foreign Currency) account to hold his foreign earnings in USD, protecting against currency risk.

👉 Why this matters: NRE/NRO accounts can’t be held once you become a Resident. Keeping them without conversion may lead to tax notices or frozen accounts.

4. He Phased Out His U.S. Investments Strategically

Rather than liquidating everything in one go (and risking high capital gains tax in a single year), Rohit worked with a cross-border advisor to exit his U.S. investments in phases. This allowed him to optimize taxes across both countries and reduce compliance headaches.

5. He Declared His Foreign Assets Under Indian Rules

As a Resident and Ordinarily Resident (ROR), he was now required to declare all foreign assets and income in India, including foreign bank accounts, real estate, and mutual funds. He included these in his Indian tax return using Schedule FA to remain compliant.

💡 Lessons for Every Returning NRI

Rohit’s approach shows us that early planning is key. He didn’t just plan his travel, but coordinated his entire financial footprint to align with Indian regulations. This meant:

No unexpected tax notices
No frozen accounts
No missed filing obligations
And most importantly, peace of mind.

🧭 NRI Nivesh Can Help You Prepare to Return

At NRI Nivesh, we frequently meet NRIs at our expos who are thinking of returning to India. During our BAATCHEET sessions and Tax Clinics, we walk them through: