Let’s demystify repatriation of funds for returning NRIs.
If yes, you’ve probably started chalking out your return plans. Amidst the excitement of returning home and the anxiety of wrapping up your life abroad, one crucial aspect that needs your undivided attention is the repatriation of funds.
So, what’s this repatriation we’re talking about? Simply put, repatriation refers to the process of sending your money from your foreign bank account back to your home country – in this case, India.
But don’t let the simplicity of this definition fool you. The real process can be a labyrinth of rules and regulations, tax implications, and formalities.
But don’t fret! We’re here to simplify this for you.
So, sit back, relax, and let’s understand everything you need to know about the repatriation of funds to India.
In this article...
1. Understand the Basics: NRE, NRO, and FCNR Accounts
To begin with, understand the basics of the accounts NRIs usually hold – NRE (Non-Residential External), NRO (Non-Residential Ordinary), and FCNR (Foreign Currency Non-Residential) accounts.
The NRE account is in INR, and both principal and interest earned are freely repatriable. FCNR accounts are in foreign currency, and again, the principal and interest are freely repatriable.
NRO accounts, however, are a different ball game. While the principal amount in an NRO account isn’t repatriable, the interest earned is. Also, you can repatriate up to USD 1 million per financial year from your NRO account after paying applicable taxes.
2. Conversion of Accounts
Once you’ve moved back to India, you need to convert your NRE, NRO, and FCNR accounts to resident accounts, or to a Resident Foreign Currency (RFC) account if you have any foreign income.
RFC accounts are useful for returning NRIs as the funds in these accounts are freely repatriable, and they are maintained in foreign currency, which means you are protected against exchange rate risks.
3. Repatriation of Sale Proceeds from Property
If you’ve invested in property in India while you were an NRI or inherited property, the sale proceeds can be repatriated under specific conditions. If the property was bought while you were an NRI, you could repatriate the funds for up to two properties.
For inherited property, you can remit up to USD 1 million in a financial year after submitting a certificate from a chartered accountant to confirm that all taxes have been paid on the sale proceeds.
4. Foreign Investments and Repatriation
If you’ve made investments in foreign currency while you were an NRI, the maturity or sale proceeds of these can be repatriated.
The same goes for your foreign income, like rent from a property you own abroad.
5. Tax Implications
Remember, repatriation isn’t a tax-free process.
The amount repatriated to India becomes a part of your income and is liable to be taxed as per the tax slab you fall into. Therefore, it’s crucial to understand the tax implications and plan your finances to ensure you’re not caught off-guard.
6. Taking Professional Help
Repatriation of funds is a complex process with many rules and regulations.
A single misstep could lead to non-compliance, penalties, and unnecessary stress. So, it might be a good idea to consult with a financial advisor who specializes in NRI services to guide you through the process.
As you close the chapter of being an NRI and open a new one of returning to your homeland, be equipped with all the necessary knowledge about your finances, especially repatriation. It’s not the most effortless part of your return journey, but it’s certainly one of the most crucial ones.
So, take a deep breath, plan ahead, consult professionals if needed, and navigate this financial maze with ease.
After all, your decision to return to India was never just about money, but a longing for home. Let no financial hurdle stand in the way of that dream.
Happy homecoming, dear NRIs!