NRI Helpdesk: Do you need to close your NRE account after coming back to India?

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*Please note that questions have been edited and/or clubbed so that we can address similar queries at once and that the answers are clear and relevant to our audience.

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What are the tax implications on sale/purchase of land, What happens if the transaction is done by way of Gift?
Agricultural land/farm house/plantation property
The transfer of agricultural land/farm house/plantation property can be only made by way of gift or sale to resident citizens of India.

Tax Implication
When an NRI sells property, the buyer is liable to deduct TDS @ 20%. In case the property has been sold before 2 years (from the date of purchase) a TDS of 30% shall be applicable.

The sale of a property will attract tax on capital gains. In case the sale is carried out within two years of the date of purchase, STCG or Short-Term Capital Gain tax is applicable as per slab rate applicable for taxable income in India. In case of sale after the two years of purchase, LTCG or Long-Term Capital Gains tax will be applicable at 20%.

In case of inheritance, the date of purchase for the previous owner will be considered to assess short term or long term capital gain transaction. The property cost in considerable will be the cost incurred by the previous owner for purchase.

I moved to India in March 2008 with family and then moved back to the UK on June 28, 2020. My family moved to the UK the year before. So I stayed around 89 days in India in FY20-21. My Indian income in FY 20-21 is below 15 lks. Essentially would I be considered resident, non-resident or RNOR? Would foreign income be taxable? Do I need to file my full list of assets still or is that not necessary?
Given that your stay in India is less than 120 days, you will essentially be considered as Non-Resident Indian. CBDT has clarified that NRIs are liable to pay tax only on income derived from an Indian business or profession. No tax will be applicable for global income or foreign income. All resident & non-resident individuals with more than Rs.2,50,000 annual income are required to file an income tax return in India. You will be liable to pay income tax on your Indian income only. Further, foreign assets held during the financial year only need to be listed in the ITR.

I'm an NRI since last 4 and a half year. I will come back to my home country within next 6 month. So my NRI tenure will be 5 Years. I will be getting retired at 58. I'm holding NRE and NRO Bank accounts in India.

My questions are as follows...

(a) Do I need to close my NRE account after coming back to India?
You become a resident Indian on Day 1 of your return. Thus you can no longer maintain NRI bank accounts or avail benefits on NRI investments. You should convert/re-designateor close your NRE account after the return, on a priority basis. If you fail to convert your NRE account within 3 months of the return, it will be considered as a violation of Foreign Exchange Management Act (FEMA) and attract a penalty.

(b) Interest earned is Tax Free for NRE account, how long the interest will remain Tax-Free after returning back to India, if I can hold the NRE account.
Interest from NRE account is tax-free only for non-residents. As soon as you return to India, any interest earned on NRE account will be taxable. You can however opt for transferring your funds in NRE accountto the RFC (Resident Foreign Currency) account upon the return.

(c) Will there be any capital gain on the investments made in last 5 years through NRE account, like SIP or ULIPs
First up, you must inform your bank, fund house and associated insurance company about the change in residential status from non-resident status. Once you become resident, the regular tax laws as applicable for ‘Resident Indian’ will apply. There will not be any change in tax laws for previous FYs.

The capital gain tax is assessed based on holding period of shares/mutual funds. The rule is similar for residents. If you sell the funds after holding for more than 12 months (from the date of purchase), long term capital gains is taxable at 10% to gains over exempted Rs 1 lakh. However, for sale within 12 months of purchase of shares/MFs, short term capital gain is levied at 15 %. For debt mutual funds, 36 months of holding is considered as long term capital gain. LTCG on debt funds is taxed at 20% after indexation, while STCG is taxed at individual’s slab rate.

(d)Best investment suggestions for NRI income in India for retirement
Retirement planning should always offer balanced income & capital protection against inflation. Know that, your overseas income will not be taxed here as you are protected by double taxation relief. As your status changes, you should avail benefits of special senior citizen schemes for resident Indians such as Senior Citizen Saving Scheme and Senior Citizen FDs & PO Schemes. These will yield fixed returns, tax benefits and stability to your portfolio. Basis your goals and risk appetite, invest in a mix of guaranteed return schemes,market linked debt &equity mutual funds and certain annuity schemes such as ULIPs, National Pension System etc. Last but not the least, you should also purchase adequate health insurance and save emergency fund for six months. It is always recommended to use professional advice and secure your funds.

Being an NRI if I invest in ULIP with GST exemption for NRI, will I continue to get this benefit even if I again become Indian citizen say after 5 years?
You should first inform your insurance company about the change in NRI status. GST is applicable to ULIPs and it will vary basis the size of premium. Kindly check with the issuing company to understand the GST cost. You would not be liable for any double taxation.

My brother-in-law passed away. Aged 75 he had one savings account and three fixed deposits in the SBI, Pune He had made his wife(who is a US citizen) as his nominee in the savings account and two of the fixed deposits. He had a OCI card, PAN and also a valid US Passport. It has been six months and no one is able to advise the lady how to get the amount lying in the bank(about 2Cr) to her in the USA Can you tell in simple language the procedure to be followed.
The NRI nominee is required to submit a declaration of death and claim the dues. The application and documents need to be duly signed and witnessed by all legal heirs of the deceased. She will require following documents: Copy of Death Certificate, Photograph & KYC of all claimant(s)/legal heirs, Witness & Surety(ies) etc. In case she cannot visit India, the documents need to be certified by Notary Public/ Indian Embassy/ Bank’s Foreign Office.The Bank will credit claim up to threshold limit to the nominee's NRE / FCNR account or repatriate to the destination country as per instructions. RBI’s consent is required over the threshold amount. You should contact the bank and sought out RBI mandated legal route for the hassle free transfer of funds.

Just got to learn about your contact details while reading online one of your NRI related article. As such I am reaching out to you to seek an help in getting out of a mess curbing all NRIs to get property registered these days without presenting their Aadhaar cards.

Case background: My maternal uncle born in India got settled in USA decades back and now holds a US citizenship. Back in 2010, he invested in property with Ansal API in Kundli, Haryana. To our dismay, the property was never offered for possession until last month when we received an offer for possession of the plot and were asked to submit Adhar Card (as a mandatory document) to get the property registered (after 12 years of wait). My uncle, who was already fed up with the builder's treatment and delays, is now facing issue in getting the property registered due to govt norms as he doesn't hold an Aadhar card (and technically he cannot). He plans to send someone in India (holding GPA) to get the property registered since he has no intentions flying down from US all the way to India in the current covid environment. Back in 2010, there was no such provision of Aadhar requirement and he had submitted his cheque along with Pan card, US passport and OCI to proceed over. But now we have been told by the builder that registry token cannot be initiated without Aadhaar number to proceed further. Could you help us guide a solution to this mess? It’s really posing a negative picture of putting out investment in India and thus prohibiting NRIs to make further investments. Any lead would be highly appreciated.
Your NRI uncle can legally proceed by providing a special power of attorney (in India) in case he cannot be present here for further transactions. Special power of attorney is registered and notarized POA. He needs to sign the authority for POA in the presence of a consulate officer or notary in his country of residence and get the attestation for the same. Aadhaar is not a mandatory document for NRIs willing to invest in real estate in India. The mandatory documents are KYC and PAN. Your uncle’s rights are protected under RERA. The matter can be amicably resolved.
The author's views do not necessarily represent the views of ET Online nor do they constitute legal advice or representation. Practice tips provided in the written materials are based on the author's experiences and the current state of the law and regulations. Please be sure to conduct legal research and analysis, or engage independent counsel for your unique situation as the law and requirements change quickly and the author's experiences may differ from your own.

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