The following points are very important for NRIs/PIOs who are coming back permanently or planning to stay back in India for an indefinite period:

  1. NRE deposits become taxable from the day you land back in India. This is because NRE deposits are tax exempt for NRIs only (as per FEMA). Anyone planning to settle back or stay back for an indefinite period of time becomes Resident in India immediately, as per FEMA. The NRE deposits should be marked as Resident or moved to RFC (Resident Foreign Currency Account).
  2. FCNR deposits/RFC deposits and any international income is tax exempt till the time you are an NRI (as per Income Tax Act) in 9 out of the last 10 years or been in India for less than 729 days in the last 7 years. In simple terms, a person who has been an NRI for more than 10 years at a stretch, might get another 2 years to enjoy this. This intermediate phase is also called RNOR (Resident but Not ordinarily Resident)
  3. Once a returning NRI becomes a Resident and Ordinarily Resident (ROR), all his domestic and international income is fully taxed. This is safely 2 years for mostly everyone after returning back.

The following strategy would help in managing your personal finances:

  1. Plan to move to India post October of any year to enjoy one additional year as an NRI as per IT Act.
  2. Restrict the taxable income in India by using tax efficient options like RFC and FCNR during the RNOR (intermediate) phase.
  3. Restrict income from taxable Fixed deposits and any other taxable incomes (like rentals) so that they are below Rs. 6.50 lakhs p.a.
  4. Use tax saving deductions like Sec 80C (maximum Rs. 1.50 lakhs p.a.) to bring the taxable income to below Rs. 5 lakhs (there is no tax for income below Rs. 5 lakhs).
  5. Invest extra funds in debt mutual fund (conservative), gold products and equity (aggressive) mutual funds.

The portfolio construct should balance safety (through FDs, RFC, FCNR), liquidity (through savings account/liquid mutual funds), growth (through equity and gold) and tax efficiency.

Equity and gold allocation should be between 25 to 35% based on one’s risk-taking ability. Invest this portion gradually. Regular income should be managed by FD’s, RFC and FCNR. You could also look at rental income and gradual withdrawals from debt funds to increase your regular income.

Invest in appropriate insurance covers like health, house and any vehicle insurance. In case, if there is a need for life insurance, buy a pure term plan. Traditional, ULIP and Pension Plans of Insurance companies are easily avoidable.


  1. Market linked investments like Mutual Funds and Equity share investments are subject to market risks. Kindly read the scheme information documents carefully before investing.
  2. All other investments too have different levels of risk like credit risk, regulatory risk etc. Appreciate this before initiating any investments.
  3. Past performance of any asset class is not an indicator of future performance.
  4. It is very important to consult a Professional Planner/Investment Adviser while implementing any of the above ideas.
  5. The above are mere suggestions and not Investment Advice as individual cases might differ.

In case, you would like professional financial guidance, then feel free to connect to me at 9845557582 or

Naveen Julian Rego-CFPCM
SEBI Registered Investment Adviser

21st April, 2020