The Complete NRI Relocation Guide: Moving to the USA and Returning to India

Relocating to a new country is a life-altering decision. If you are an Indian resident relocating to the USA, or an NRI coming back to India after years of living abroad, there are many financial and legal implications to consider. A well-planned transition can save you from unnecessary taxes, penalties and compliance headaches.

This guide is a comprehensive guide on everything that you need to know before you move to the USA and when you decide to return back to India.

Part 1: Before  Moving to the USA

1.  Converting Bank Accounts to NRE and NRO

The instant you are classified as a Non Resident Indian (NRI) under FEMA your resident savings account becomes non compliant. Indian tax laws determine this by not staying in India for more than 182 days in a financial year (April 1 to March 31). Once you become an NRI, FEMA says you should convert your Indian resident savings account to an NRE or NRO account immediately. Living abroad with a resident account violates FEMA from day 1. NRIs cannot continue to operate a resident savings account as it is against the Foreign Exchange Management Act (FEMA).

Once you are an NRI based on the criteria, you should inform your bank and change your resident accounts within 90 days. Under FEMA your existing resident savings accounts will have to be re-designated as NRO accounts. Existing savings accounts of residents have to be converted into a Non Resident Ordinary (NRO) account.

• NRE Account: For foreign income like your salary from US. You can hold rupee funds, earn interest in India (tax-free) and it’s fully repatriable.
• NRO Account: to manage income earned in India like rent, dividends, or pension. Interest is subject to 30% TDS tax and repatriation is limited to USD 1 million per financial year with Form 15CA/CB certification.
• Action Step: The week you move, call up your bank’s NRI cell. Now most banks have online conversion available. You will need a valid passport, visa, PAN card, overseas address proof and proof of Indian address. Documents are often required to be notarised and/or attested.

2.  Review and Update Insurance Policies

• Term Insurance: The term plans which you bought in India are valid even after you become an NRI. Most Indian insurers offer life insurance to NRIs and term plans bought in India will remain valid even if the residency status changes. Once the change in the residency status is updated, premiums can be paid further through various modes of payments, including their overseas bank account, credit cards or Non-Resident External (NRE)/ Non-Resident Ordinary (NRO) accounts maintained in India. However you will have to inform your insurer if your residence status changes.
• Health Insurance: Your health insurance in India might not be valid in the USA. Most Indian health insurance policies cover treatment in India only. In the USA they do not include costs of hospitalisation. International health insurance plans are separate for worldwide coverage. Major elective surgeries like knee replacements and cardiac procedures are 70% cheaper in India, and many NRIs in these regions use Indian plans as financial cover for them.
• Action Step: Call your insurer to update your KYC and address. If you are continuing a policy, ensure that the premium payments are coming from your NRE account.

3.  Re-evaluate Existing Investments

• Mutual Funds: An NRI can still invest in Indian Mutual Funds but will need to do NRI KYC and FATCA declarations. It’s important to note here that many fund houses don’t accept money from NRIs based in the US and Canada due to FATCA and the costs of compliance. NRIs in the US can invest in Indian mutual funds, but it takes conscious planning and patience. Under FATCA, financial institutions are required to report on the debts of foreign nationals. Typically, US NRIs are accepted by about 8-10 AMCs, such as SBI, ICICI Prudential, Kotak, PPFAS, etc. (subject to change).
• KYC and FATCA: FATCA/CRS declarations are mandatory for all NRI investors. This is a requirement for tax compliance in India.
• PPF (Public Provident Fund): NRIs are not allowed to open a fresh PPF account. But you can hold on to an existing one that was opened while resident until its 15-year maturity, but not beyond that.
• Sovereign Gold Bonds (SGB): NRIs cannot make fresh subscriptions to SGBs. If they became NRIs after investing while resident, they may continue to hold the bonds until maturity.
• Direct Equity and PIS Account: NRIs can invest in direct equities but they need to do it through a Portfolio Investment Scheme (PIS) account in case of NRE account for fully repatriable investments. The PIS is a route through which the RBI keeps track of foreign money coming into Indian equities. PIS Account is a special account for NRIs opened for trading in the Indian stock market. NRIs are not allowed to invest directly in Indian equity without a PIS account.
• Action Step: If you plan to trade directly in Indian equities, review your portfolio, complete FATCA declarations, and open a PIS account.

4.  Real Estate Management Plan

Power of Attorney (POA): If you are a property owner in India and will not be around to manage the property, do consider registering a Power of Attorney in favour of a trusted person. A POA is a legal document that gives someone the authority to act on your behalf and prevents you from making multiple trips to the bank while ensuring compliance with FEMA, RBI and state laws. NRIs can give PoA to the selected person while abroad and send the deed to India. The PoA-holder must register the deed in India within 90 days of receipt. Under the Registration Act, 1908, a registered Power of Attorney can be used for transferring immovable property.

Types of POA

• General POA: Gives the agent a broad range of powers including the ability to sell, manage or lease property.
• Limited POA: Used to do a specific act, like sell a certain piece of real estate.
• Rental Income and NRI link: Rental income from Indian property needs to be credited to your NRO account and is taxable in India. There is no lower limit. Your tenant has to deduct TDS at 31.2% from the very beginning. The applicable rate of TDS is 30% plus applicable cess and surcharge which can be up to 39% in aggregate.
• Action Step: Drive a POA before you get on the road. Train your agent to follow TDS and file tax returns for the rental income.

5.  Management of existing loans and EMIs

• Home Loan: If you have a running home loan, you need to inform your lender about your NRI status. You have to make your repayments through your NRE or NRO account or through RBI-approved overseas remittance channels. NRIs have to pay the monthly installments (EMI) from their NRE account. The loan will then be reclassified as NRI loan.
• Action Steps: Notify your lender, update your contact details and set up auto payments from your NRE/NRO account.

6.  NRI Taxation – A Quick Overview

Income Taxable in India – As an NRI, only that income which is received, accrued or deemed to accrue or arise in India is taxable in India. This consists of:

• Income from renting Indian property
• Interest on NRO accounts and fixed deposits
• Dividends and capital gains from investments in India
• Salary for work done in India

Generally, foreign income earned and received outside India is not taxable in India.

• DTAA (Double Taxation Avoidance Agreement): India and USA have DTAA to avoid double taxation. A DTAA allocates the taxing rights between India and your home country and often caps the rates on dividends and interest. You will need Tax Residency Certificate (TRC) and Form 10F to claim treaty benefits. Treaty benefits are not automatic and require proper documentation and disclosure.
• Advance Tax: If your tax liability in India is more than ₹10,000, you may need to pay advance tax. Every taxpayer is required to pay advance tax if his estimated tax liability for a financial year is Rs 10,000 or more.
• NRI’s ITR Filing: If an NRI has income from Indian sources, they have to file ITR using form ITR-2 but they do not have to disclose foreign income or assets unless they become residents. You need to file if you want to claim TDS refunds or report capital gains or respond to AIS/Form 26AS mismatches. The return filing due date for NRIs not requiring tax audit is 31st July.
• Action Step: Discuss your tax liabilities with a tax advisor to plan your tax liabilities. Keep your TRC and Form 10F ready for claiming DTAA benefits.

7.  Key Documents Arrangement

Create a digital and physical file of all important documents including;

• Valid US visa in your passport
• PAN Card and Aadhar Card
• Bank statements for all accounts.
• Property documents and sale deeds 
• Insurance policies and loan agreements
• Children’s birth and marriage certificates
• Salary slips and employment contract
• Action Step: Leave copies with trusted family members or a financial advisor.

8.  Nominee Updates and Mobile Number Registration:

• Nominee Updates: Update nominee details in all your financial accounts like bank accounts, mutual funds, demat accounts, insurance policies etc.
• Mobile Number Setup: Ensure that you have an active Indian mobile number to receive OTPs and conduct banking transactions. If you’re heading abroad for extended stays, look at getting a virtual Indian number.
• Action Step: Update your nominees and ensure that your mobile number is active and linked to all of your financial accounts.

Part 2: Returning to India from the USA

1.  What constitutes a change in tax residence?

Every time you come back to India , your residential status for tax purpose will be based on the number of days you stay in India . For US-based NRIs, “NRI” can mean different things under different laws. Your Indian tax residency is determined under the Income-tax Act (which uses stay-based tests such as the 182-day rule in certain cases), your FEMA residency is based on the purpose and intention of residing outside India, and your US tax residency follows US tax rules. It’s possible to be an NRI under one law while being treated differently under another

You may be eligible for Resident but Not Ordinarily Resident (RNOR) status for the first 2-3 years. To qualify as an RNOR, you must have lived outside India for at least 9 out of the preceding 10 financial years or you must have been in India for 729 days or less during the preceding 7 financial years. Foreign income in RNOR is not taxable in India. Use this window as a chance to get your finances back in order. Your RNOR status is valid for two to three years, giving you a breather: most foreign income is not taxable in India, unless you have a business overseas that is controlled from India. Foreign income is not taxable during the RNOR phase and there is no requirement to disclose foreign assets.

• Resident and Ordinarily Resident (ROR): If you are ROR, your income earned from anywhere in the world is taxable in India. You then need to report all foreign income and assets.
• Action Step: Begin counting days from your arrival. See if you qualify for RNOR status and plan your taxes accordingly.

2.  Filing Exit Year Post Tax Returns in USA

• Dual Status: You could be a dual tax resident in the year you move back to India. You will likely need to file a US tax return for the period of the year that you were a US resident.
• FBAR (FinCEN Form 114). You are required to file an FBAR if, at any time during the calendar year, the aggregate value of foreign financial accounts exceeded $10,000.
• Form 8938 (Statement of Specified Foreign Financial Assets): If your foreign assets exceed $50,000 on the last day of the year or $75,000 at any time during the year, you must file this form.
• Form 8822 (Change of Address): Report your new address in India to the IRS.
• Sailing Permit (Departure Permit) : Technically, most aliens need to have a Sailing Permit before they can leave the US. That means visiting a local IRS office with an appointment at least two weeks in advance of your departure.
• Action Step: Consult with a US-India cross-border tax advisor to help with this complex filing.

3.  401K, ROTH IRA, HSA, Social Security: What to Do with Them

401K and ROTH IRA: You have a choice.

• Keep the funds in the US account
• Withdraw as a lump sum (taxable in the U.S. and possibly in India)
• IRA Rollover (Not a Taxable Event)

• HSA (Health Savings Account): If you are no longer covered by a US-based HDHP, you can no longer make any contributions. You can still withdraw funds tax-free for qualified medical expenses.
• Social Security: If you have paid into the system for at least 10 years, you may be eligible for benefits at retirement. You don’t have to live in the US to get paid.
• Action Step: Review your retirement accounts and determine the best course of action based on your long-term plans. Cross-border tax advisor?

4.  Reconversion of NRE/NRO Accounts

When you come back to India, you will have to convert your NRE/NRO accounts into resident savings accounts. Your NRE savings account will have to be converted to Resident savings account or Resident Foreign Currency (RFC) account. Your NRO account is converted to a normal resident account. The interest is generally taxable regardless of India’s exemption, because the US taxes worldwide income.. You can also have a Resident Foreign Currency (RFC) account to keep foreign currency.

Action Step: Call your bank immediately after you return and ask for conversion.

5.  Close Your USA Real Estate

Own property in the US, decide to sell or hold. Tax consequences of selling as a non-resident may be different from those of selling as a resident.

Action Step: Consult a tax advisor on the implications of selling US property before or after returning to India.

6.  How to Update Your India Financial Records

• PAN and Aadhaar: Check if your PAN is linked with Aadhaar. Please update your address and contact details.
• Mutual Fund KYC & Demat Account: Update KYC of all your financial accounts as per your resident status.
• Action Step: Update all your records to reflect your new resident status.

7.  Managing Your US Visa and Green Cards

If you have a Green Card you are treated as a US resident for tax purposes until you formally surrender it. Form I-407 – Renounce your Green Card.

Action Step: Do not file I-407 if you intend to return to the US permanently Consult with a US immigration lawyer.

8.  Timing Repatriation Just Right

The best time to move is to align yourself with the Indian financial year (April 1 to March 31) and the US tax year (January 1 to December 31). This will help you lower your tax burden.

Action Step:Talk to your tax advisor about the best time to move.

9.  Tie Up Loose Ends In USA

• Pay off outstanding debts and loans
• Close credit cards or keep them active with a U.S. address
• Change your mailing address
• Cancellation or transfer of health insurance
• Keep your Social Security Number readily available in a safe place
• Action Step: Make a checklist to be sure all loose ends are tied up.

10.  First 90 Days In India – Get It Right

• Health Insurance: Get the best health insurance policy in India at the earliest. NRIs can purchase Indian health insurance plans online without being present in India.
• Customs Allowances: Know customs regulations for household goods and personal effects on landing.
• School Admissions for Children: It is advisable to apply early for children.
• Housing: Housing arranged prior to or shortly after arrival.
• Action Step: Get these logistics in place before you arrive in India.

FAQ Section

Q1: I’m moving to the US, can I maintain my resident savings account?

No.  Once you become an NRI (stay less than 182 days in India in a financial year), you have to change your resident savings account to an NRE or NRO account as an NRI. Using a resident account while living abroad violates FEMA. Such accounts need to be redesignated as NRO accounts, under FEMA.

Q2. What is the difference between NRE and NRO?

NRE Account: For foreign income (eg. US salary), tax-free interest in India, fully repatriable. NRO Account : Income in India (rent, dividends) Interest charged at 30% TDS Repatriation limited to USD 1 million per annum

Q3: Am I required to declare my US income in India?

If you are a Non Resident Indian, you are not required to declare your foreign income in India. You are taxed only on income which you have received, accrued or is deemed to accrue in India.

Q4: If I move to the US, can I continue my term insurance policy?

Yeah. If you become an NRI, your term plans purchased in India will still be valid. To save GST you need to inform your change of status to the insurer and update KYC and pay premiums from an NRE account.

Q5: Which mutual funds can NRIs based in the US invest in?

FATCA also means many fund houses do not accept investments from US-based NRIs. SBI, ICICI Prudential, Kotak and PPFAS generally accept US NRIs. (subject to change). About 8-10 AMCs.

Q6. What is RNOR status and why is it important?

RNOR is a transitional tax status for NRIs who are returning. Foreign income is not taxable in India for RNOR (2-3 years). This window is useful for re-ordering finances before becoming ROR when all income is taxable world-wide.

Q7: What is a PIS account? Do I need one?

NRIs can invest in Indian equities through either the PIS (Portfolio Investment Scheme) route or the non-PIS route, depending on the type of investment, repatriation requirements, and the broker/bank being used. While PIS accounts continue to be used for certain exchange-traded equity investments on a repatriation basis, many brokers now offer non-PIS accounts for eligible investments, simplifying the investment process.

Q8. How do I avail DTAA benefits?

For availing the benefits of DTAA, you need a Tax Residency Certificate (TRC) from your country of residence and Form 10F. Treaty benefits are not automatic and require proper documentation and disclosure.

Q9: What will happen to my 401K if I return to India?

You can leave it in the US , take it as a lump sum ( taxable ) or roll it over to an IRA ( non-taxable event ) . Tax consequences of each option are different for the US as well as India. Consult with a cross border tax advisor.

Q10: Do I have to file an ITR in India as an NRI?

Yes, if you have taxable income in India (from rent, interest, capital gains) or TDS has been deducted and you want to claim a refund. You need to file to get TDS refunds, report capital gains or respond to AIS/Form 26AS mismatch. Income from India for NRI has to be filed in Form ITR-2.

Q11: What is TDS rate on rental income for NRI?

For interest and rental income earned in NRO account, TDS rate is 30% plus surcharge and cess. Your tenant will have to deduct TDS @ 31.2% from the beginning without any lower limit. The TDS rate on rent payments is fixed at 30% plus applicable cess and surcharge which can cumulatively go up to 39% .

Q12 – Do NRIs need to pay advance tax in India?

NRIs also have to pay advance tax if their estimated tax liability is more than ₹10,000 after adjusting for TDS. All taxpayers are required to pay advance tax if their estimated tax liability for a financial year is Rs 10,000 or more.