Key Compliances to Consider on Change of Residential Status from Resident Indian to Non-Resident Indian

Once a person changes from being a resident to a Non-Resident Indian (NRI), several regulatory and compliance requirements arise under Indian law, particularly the Foreign Exchange Management Act (FEMA) and Income Tax Act. Loads of people miss these needs, ending up with non-compliance penalties or a whole bunch of trouble in managing their Indian bank accounts and income.

Understanding the compliances applicable upon a change in residential status from Resident to Non-Resident Indian (NRI) is crucial to ensure seamless financial management, proper reporting, and lawful repatriation of funds.

Below is the comprehensive overview of the key areas you need to pay attention to once you've become a Non-Resident Indian (NRI).

1. Assets in India:

• A person resident outside India can hold, own, transfer or invest in any immovable property situated in India if such property was acquired, held or owned by him/ her when he/ she was resident in India or inherited from a person resident in India.
• No permission is required for continuing to hold such immovable property, movable property and gold and jewellery in India by an emigrating Indian.
• There is no restriction on sale of immovable property, movable property and gold and jewellery in India. However, sale proceeds of these assets have to be credited only to the NRO account of the individual.
• Funds held in the NRO account can be repatriated up to US $ 1 million in a financial year, subject to the satisfaction of the Authorized Dealer ('AD') bank

2. Bank Accounts held in India:

• FEMA regulations do not permit NRIs to hold resident savings bank accounts.
• Existing savings accounts must be redesignated as NRO accounts, or alternatively, NRE accounts may be opened as per RBI guidelines.

3. Compliance for Investments:

• Person resident in India, holding shares, debentures of Indian companies, Mutual funds at the time of becoming NRI, should intimate to the concerned company or the broker / bank (in case of DEMAT holdings), to update the change of status as 'Non-resident'.
• However, they cannot invest in the government's small savings or Public Provident Fund (PPF) schemes.

4. Deposit with the Indian companies, Units of UTI and Government Bonds:

• RBI permission is not required for continuing to hold deposit with the Indian companies, units of UTI and Government bonds after becoming NRI.
• Interest income or proceeds on sale/maturity of such deposits, units or bonds must be credited to NRO account of NRI.

5. Continuation of loan/ Deposits and Advances given to another Resident Indian:

A resident who becomes an NRI may continue with deposits & advance given to resident person as well as the rupee loan given to another resident in India without prior RBI approval. It is advisable to intimate the borrower regarding change in residential status. Repayment of loan must be credited to the NRO account.

6. Insurance policies in India:

• RBI approval is not required to hold and continue the insurance policies in India after becoming an NRI.
• There are no restrictions on payment of insurance premium.
• All proceeds on surrender or maturity of life insurance policies should be credited to the NRO account or any other account specified by the RBI.
• It is advisable to intimate the concerned insurance companies about changes in residential status along with updated details of bank accounts.

7. Repatriation of income:

NRI may repatriate current income like rent, dividend, pension, interest subject to an appropriate certification by a Chartered Accountant (CA), certifying the eligibility of the income proposed to be remitted and that payment of applicable taxes.

How KDP Accountants Can Help:

Managing compliance after becoming an NRI involves navigating FEMA regulations, RBI guidelines, tax laws, and procedural documentation. At KDP Accountants, we specialize in providing end-to-end support services to NRIs, including residential status determination, FEMA compliance, bank account restructuring, investment advisory, NRI taxation, TDS compliance, and income repatriation certifications.

With over 70 years of experience, our professionals ensure that your transition remains compliant, tax-efficient, and stress-free. Connect with us at enquire@kdpaccountants.com to receive personalized guidance and seamless compliance support tailored to your global lifestyle.