I have recently moved to US under L1 visa for work. Am I supposed to pay tax on my investment amount for the FD, mf I have in my Indian demat account? I have around 23 lakhs invested in MF, 46k in stocks and 10lakhs in PPF. Should I move out my money?

Ans: This transaction may not incur tax liability but you need to consult CA for accurate guidance

Vipul Bhavsar
Chartered Accountant
www.capitalca.in

Ans: You have done well to build strong savings abroad.
Now, you have returned to India with Rs 1 crore in shares and Rs 1 crore in 401(k).
You have also used Rs 60 lakh to buy land here in India.

Let us assess your concerns carefully and offer a 360-degree financial view.

Overview of Your Financial Position
You returned from the USA in 2022.

You invested Rs 60 lakh in land from your foreign savings.

You have Rs 1 crore in Indian shares.

You have Rs 1 crore in a US-based 401(k) retirement account.

You have already paid tax on foreign income while in the USA.

Now your focus is on taxation and fund shifting across countries.

Tax Implication on Land Purchased with Foreign Savings
You used foreign savings to buy land in India.

That amount is not taxable again in India.

Reason: It is your own post-tax money earned abroad.

India does not tax remitted capital that is legally earned and declared.

However, any gains from that land in future will be taxable.

For example, if you sell the land in future at profit, capital gains tax applies.

Till then, there is no immediate tax burden for this purchase.

Make sure you maintain proper remittance records and proof of source.

These will help in case of any IT inquiry later.

Important Tips to Protect This Land Investment
Don’t consider the land as an investment.

It is illiquid and maintenance-heavy.

It gives no returns and cannot fund retirement.

If you bought it for personal use, then okay.

But don’t buy more land with financial goals in mind.

Real estate is risky and inefficient in long-term wealth building.

Tax Implication of Indian Shares (Rs 1 Crore)
These are equity investments within India.

You must declare any capital gains annually in ITR.

Long-term gains above Rs 1.25 lakh are taxed at 12.5%.

Short-term gains (under 1 year) are taxed at 20%.

No further tax if you hold, but declare dividends if received.

Use regular plans through a Certified Financial Planner, not direct options.

Regular plans offer guidance, alerts, and goal-based rebalancing.

Disadvantages of Direct Mutual Funds (if holding any)
If you have invested directly without an MFD, you may face issues.

No personal guidance or tax planning support.

No help during market corrections.

No rebalancing or switching suggestions.

Direct plans look cheaper but cost more if misused.

Shift to regular plans via CFP-led MFD now.

They will help optimise tax, exit, and long-term strategy.

US 401(k) Account – Key Tax Considerations
401(k) is still a US-based retirement product.

India will treat it as a foreign asset.

You must declare it under foreign assets in ITR if status is Resident and Ordinarily Resident (ROR).

Any withdrawals from 401(k) may be taxed in the US.

India may also tax the withdrawal unless treaty benefit applies.

But you can claim relief under Double Taxation Avoidance Agreement (DTAA).

Keep all 401(k) statements for tracking and proof.

Changing Tax Residency Status
After returning in 2022, your tax residency has changed.

First 2 years: You may qualify as RNOR (Resident but Not Ordinarily Resident).

RNOR enjoys some benefits.

Foreign income not taxed in India if not received here.

After that, you become ROR (fully taxable in India).

In ROR status, global income is taxable in India.

So, taxation on your 401(k) withdrawals in future depends on your residency status.

Shifting 401(k) Funds to India – Key Strategy
First, understand that 401(k) withdrawals are taxable in the US.

You may also pay penalty if withdrawn before 59.5 years of age.

Wait until you reach retirement age to avoid penalty.

Withdraw slowly over years. Not all at once.

Use the US-India DTAA to avoid double tax.

Show withdrawal in ITR and claim US tax credit.

Don’t repatriate full money in one go.

Repatriate in parts. Stay under LRS and FEMA limits.

Work with a Chartered Accountant who understands NRI tax and FEMA.

Avoid rushing transfer. Plan timing based on your cash need.

Taxation and Reporting for Remittance
When you bring money from abroad, remember:

India does not tax foreign capital brought legally.

You must still disclose large remittances in ITR.

If you receive foreign income now, it will be taxable in India if you are ROR.

You must file Foreign Asset Schedule in ITR.

Use ITR-2 or ITR-3 for such cases.

Failing to report can attract heavy penalties.

Suggested Strategy for Your Situation
Don’t worry about tax on land purchase. That is not taxable now.

Keep all documents proving source and remittance.

Declare all foreign and Indian assets in tax filing.

Use DTAA when withdrawing from 401(k).

Shift funds to India slowly. Avoid sudden large remittance.

Maintain NRE/NRO accounts as needed.

Reinvest idle Indian money via regular mutual funds.

Avoid real estate, direct funds, or index funds.

Work with a certified CFP and qualified CA in India.

Avoid Index Funds and ETFs
If your share portfolio includes index funds or ETFs, be cautious.

Index funds follow the market blindly.

They cannot avoid loss in falling markets.

They give no personalisation or active stock selection.

ETFs are market-driven and often volatile.

Actively managed funds are safer.

A good fund manager makes timely moves.

You need smart strategy, not just low cost.

Don't Use Annuities or Insurance-Based Investment Products
Avoid ULIPs, endowment plans, or annuity schemes.

These give poor returns and lock your money.

Also carry hidden charges and penalties.

Stay away from anything mixing insurance and investment.

Key Action Items for You
Don’t worry about land purchase tax. It's already funded by taxed money.

Plan 401(k) withdrawals smartly over years.

Claim tax credit under DTAA.

Repatriate funds only as per Indian laws.

Reinvest Indian savings in regular mutual funds.

Keep an emergency fund in liquid mutual fund.

Buy pure term insurance if not done yet.

File correct ITR with foreign assets and income.

Finally
You have done well to return to India with strong financial footing.

You must now shift from asset accumulation to asset protection and planning.

Keep 401(k) withdrawals slow and strategic.

Use DTAA and proper disclosures to stay tax efficient.

Don’t rush repatriation or land reinvestments.

Use mutual funds in regular plan through a CFP.

Avoid direct, index, and real estate options.

Work with a trusted CA for FEMA and ITR filings.

Your savings can now serve your life goals in India safely.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

Ans: It is good that you have started early.
Investing in equity and mutual funds shows long-term vision.

Your decision to stay invested without panic is also wise.
Let us review the tax aspects in detail from all sides.

» Your Residential Status Matters for Tax

– You are an Indian citizen but staying in Oman.
– For tax in India, residential status is key.
– If you stay outside India for 182 days or more in a year, you are an NRI.
– NRIs are taxed only on income earned or received in India.
– So capital gains from Indian investments are taxable in India.

– Salary earned in Oman is not taxable in India.
– But income from Indian mutual funds or shares is taxable.
– Even if you do not sell, tracking tax impact helps in future planning.

» No Tax is Due Until You Sell the Investment

– You said you have not sold any mutual fund or equity yet.
– That means you have no capital gains realised.
– Tax is only on realised gains, not on holding value.
– So for now, there is no tax due.

– Just holding the investment doesn’t create tax liability.
– But keep a record of your purchase price and date.
– It will help when you decide to sell later.

» Tax on Equity Mutual Funds and Shares

– If you hold equity mutual funds or shares for over one year, it is long term.
– Gains above Rs. 1.25 lakh in a year are taxed at 12.5%.
– Gains below Rs. 1.25 lakh in a year are tax-free.
– For short-term gains (sold within 1 year), tax is 20%.

– This rule applies even to NRIs investing in Indian equity.
– Tax is deducted only when you redeem your investment.

– For now, since you have not sold, there is no capital gain.
– But plan the exit carefully when you redeem later.
– Consider selling in parts to stay within exemption limit.

» Tax on Debt Mutual Funds for NRIs

– If any of your mutual funds are debt-oriented, tax is different.
– There is no benefit of long-term tax rate.
– Whether short-term or long-term, gains are taxed as per your slab.
– As an NRI, your slab is not relevant since tax is deducted at source (TDS).

– For debt funds, plan your redemption timing well.
– Use them only for fixed goals or short-term needs.

» Mutual Fund TDS Rules for NRIs

– For NRIs, mutual fund companies deduct TDS on capital gains.
– TDS is 20% for short-term equity gains.
– TDS is 12.5% on long-term equity gains above Rs. 1.25 lakh.
– For debt mutual funds, TDS is as per slab rate.

– Even if actual tax is lower, TDS may be higher.
– You may have to file tax return to claim refund.
– Filing return helps in getting extra TDS back.

» Grow App is a Direct Platform – Caution Advised

– You are investing through Grow App which gives direct plans.
– Direct plans do not involve guidance from Certified Financial Planner.
– Fund selection, portfolio rebalancing, and risk planning is your job.

– Many investors follow star ratings blindly.
– But past returns are not future guarantees.
– Mistakes in direct funds can reduce long-term returns.

– Instead, invest through regular plans with CFP support.
– You get guidance, review, and personalised fund choice.
– It also helps in exit planning and tax-efficient switching.

– Avoid direct investing without expert guidance.
– Better pay a small commission than take costly decisions.

» Index Funds Should Be Avoided

– Some direct platforms push index funds.
– Index funds copy the market and offer no active risk control.
– They fall heavily during market corrections.

– During COVID fall, index funds dropped more than some active funds.
– There is no fund manager protection in index funds.
– For long-term wealth, active funds give better upside.
– Also, better downside protection during crashes.

– Since you are investing for the long term, go for active mutual funds.
– Choose 4–5 funds across categories with CFP advice.

» Currency Impact is Not Taxed

– You invest in rupees but earn in Omani Rial.
– Currency conversion gains are not taxed.
– Only the capital gain from fund or equity sale is taxed.

– But when you repatriate money to Oman, check FEMA rules.
– You can freely send money abroad from NRE or FCNR accounts.
– Don’t use savings account in India for repatriation.
– Use NRE or NRO accounts for Indian investment transactions.

» Maintain Proper Investment Records

– Keep all fund statements and purchase dates safe.
– Note down your folio numbers and scheme names.
– Keep contract notes for equity share purchases.

– When you sell later, you need this data for capital gain calculation.
– This helps in accurate tax filing and audit-proof planning.

– NRIs also need Form 10F and TRC if claiming DTAA benefits.
– This helps avoid double taxation between Oman and India.

» Your Investment Approach is Right

– Rs. 8 lakhs lump sum in equity is fine.
– Rs. 5,000 SIP is a strong long-term habit.
– Make SIPs step-up yearly to build bigger wealth.

– Avoid over-diversifying.
– 4 to 5 quality mutual funds are enough.
– Don’t chase high short-term returns.

– Stay consistent and keep investing.
– Review every 6 to 12 months with a CFP.

– Avoid investing in insurance products with returns.
– ULIPs and endowment plans are not suitable for NRIs.
– They offer poor flexibility and low value.

» Reinvest Dividends, Avoid Payout Mode

– Always choose growth or accumulation option in mutual funds.
– Dividend options give taxable payouts and reduce compounding.
– As an NRI, dividend income is also taxable.
– Dividend is added to income and taxed at slab rate.

– Let your fund grow inside without withdrawals.
– Reinvest to get compounding benefit.

» Finally

– Since you have not sold, there is no tax yet.
– Tax arises only when you redeem.
– For now, keep investing and stay patient.

– When you sell later, long-term gains above Rs. 1.25 lakh are taxed at 12.5%.
– Short-term equity gains are taxed at 20%.
– For debt funds, entire gain is taxed as per slab.

– Direct fund investing through Grow may not suit all investors.
– Without guidance, mistakes can reduce your long-term wealth.

– Switch to regular plans with a Certified Financial Planner’s help.
– They guide on selection, taxes, withdrawals, and reviews.
– Active mutual funds offer better returns and protection than index funds.

– Keep SIPs running and track your portfolio yearly.
– Align funds to long-term goals.
– Focus on 3 to 5 funds with strong consistency.

– Avoid NFOs, fancy themes, and direct equity trading.
– Build wealth slowly and steadily.
– Repatriate money through proper NRE/NRO route only.

– Maintain full records and be tax-compliant in India.
– File return only if tax is deducted or gain is realised.
– Use help from CFP when filing or exiting investment.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in

https://www.youtube.com/@HolisticInvestment

Ans: You’ve done well by building investments in mutual funds, PPF, and FDs.
Even after moving abroad, maintaining your financial base in India shows maturity.
Now, it’s important to adjust for taxation, rules, and smart planning.
Let’s understand the full picture from a 360-degree perspective.

» Understanding Your Resident Status

– You’ve moved to the US for work.
– Your residential status in India changes to NRI (Non-Resident Indian).
– This change affects taxation on Indian investments.
– Your income earned in India is still taxable in India.
– You also need to report these in the US, as per US tax laws.
– Double taxation risk exists, but treaties reduce the burden.

» Tax Implications on Mutual Funds (India Side)

– You hold Rs 23 lakhs in Indian mutual funds.
– If they are equity mutual funds, taxation applies only on sale.
– LTCG above Rs 1.25 lakh is taxed at 12.5%.
– STCG is taxed at 20%.
– If they are debt funds, gains are taxed as per slab.
– No extra NRI surcharge in India for mutual funds.
– TDS (Tax Deducted at Source) applies for NRIs on redemption.
– Equity fund TDS is 10% on LTCG and 15% on STCG.
– Debt fund TDS is 30% flat on gains.
– This TDS is deducted before payout.
– TDS is not the final tax. You still must file return in India.
– You can claim refund if tax paid is more.

» Tax Implications in the US on Indian Mutual Funds

– US treats Indian mutual funds as PFICs (Passive Foreign Investment Companies).
– PFIC rules are complex and strict.
– Reporting is required under Form 8621.
– PFIC gains are taxed unfavourably with interest penalty.
– Gains can be treated as ordinary income, not capital gains.
– Tracking and filing PFIC taxes need a specialist CPA in the US.
– So, redemption of Indian mutual funds may trigger US tax complications.
– It may result in more tax in the US than in India.

» What Should You Do with Indian Mutual Funds?

– Don’t redeem without checking US tax consequences.
– If you need money, redeem only part—not full.
– Check if you can meet the need from FD or PPF.
– Redeem mutual funds only when other sources are not enough.
– Track cost of purchase and holding period.
– Work with a Certified Financial Planner and a US-based tax advisor.
– They can help reduce PFIC tax impact.

» Why Regular Funds with MFD + CFP is Better

– If you continue investing in India, prefer regular plans.
– Avoid direct funds as they give no guidance.
– As an NRI, your risk profile and taxation are complex.
– A Certified Financial Planner can adjust fund selection accordingly.
– They guide you on rebalancing and timing redemptions.
– Direct funds don’t offer any emotional or strategic help.
– Regular plans via MFD + CFP are safer and more efficient.
– You pay for service, but avoid bigger financial mistakes.

» Why You Should Avoid Index Funds as NRI

– Index funds are passive. They follow the market blindly.
– In volatile phases, they don’t protect downside.
– They also invest in poor-performing companies just due to weight.
– As an NRI, you need active risk management.
– Actively managed funds adjust allocation based on economic trends.
– Fund managers exit weak sectors and protect capital.
– Index funds lack this agility.
– Avoid them unless you are deeply involved in market tracking.
– For peace and performance, active funds are better.

» Tax Impact on PPF Account

– You can’t extend PPF account after NRI status.
– But existing PPF can continue till maturity.
– Interest is tax-free in India.
– But the US may tax PPF interest as income.
– That depends on your US tax filing and your CPA’s method.
– Don’t withdraw PPF unless urgent.
– Let it mature. Don’t invest fresh if not allowed.

» Tax Impact on Fixed Deposits

– Interest from FD is taxable in India for NRIs.
– TDS is 30% on interest earned.
– If interest exceeds Rs 5,000 annually, TDS applies.
– Declare FD interest in India and in the US.
– You may have to pay tax in US on global income.
– But India-US DTAA may give tax relief.
– Choose NRO FD if you retain it.
– You cannot hold resident FD once NRI.
– Inform the bank and convert account to NRO/NRE as needed.

» Currency Conversion and Repatriation Rules

– If you redeem mutual funds or FDs, check RBI repatriation limits.
– You can repatriate up to USD 1 million per financial year.
– Use form 15CA and 15CB (from a CA) for large transfers.
– Bank may also need FEMA compliance documents.
– Keep all KYC updated to avoid transaction delays.

» What to Do Before Redeeming Any Investment

– Confirm your Indian residential status change with all AMCs and banks.
– Update KYC to NRI status.
– Convert savings accounts to NRO/NRE if not yet done.
– Speak with your Certified Financial Planner in India.
– Speak with a CPA in the US.
– Create a plan for phased withdrawal if needed.
– Avoid full redemption unless funds are urgently needed.

» Smart Moves if Withdrawal is Needed

Use FD money first – It’s simple and avoids PFIC issues.

Avoid redeeming equity mutual funds unless really needed.

If you must redeem, do it in small parts.

Redeem funds with long holding first to reduce tax.

Choose funds with lower gains to minimise tax impact.

Avoid liquidating everything at once.

Use SIP stoppage instead of full exit if possible.

Keep all documents and transaction history ready.

Track TDS and file returns in India to claim refund if applicable.

» Emergency Access Planning

– Keep Rs 1–2 lakh in NRE savings account.
– Keep some liquid mutual fund units if PFIC tax is manageable.
– Avoid using PPF unless fully matured.
– If emergency is short-term, use US income or ask for support from US-side accounts.
– Avoid moving money unless critical need.
– Each repatriation from India to US carries cost and paperwork.
– Plan ahead for any such movement.

» Reassess Financial Goals Post-Move

– Your risk profile and priorities have now changed.
– India investments were made for Indian goals.
– Now, decide if you’ll return to India or settle in US.
– If you return, retaining mutual funds is fine.
– If staying in US, slowly move capital to US-compliant instruments.
– Avoid keeping too much in India that’s hard to monitor.
– A Certified Financial Planner can help restructure for new goals.

» Insurance and Estate Planning Now Becomes Important

– Ensure nominees on all Indian accounts are updated.
– Create a Will for Indian assets.
– Also consult a US lawyer for estate planning there.
– Avoid joint accounts if legal succession is unclear.
– Keep account access documents safe and accessible to spouse or family.
– Don’t leave assets scattered without clarity.
– Regularly update this list every year.

» Common Mistakes to Avoid

– Ignoring PFIC rules and ending up with huge US tax bills.
– Using direct mutual funds without tax strategy.
– Keeping resident accounts after becoming NRI.
– Not filing Indian tax return due to “NRI” status.
– Thinking Indian investments are tax-free in the US.
– Making fresh PPF contributions after becoming NRI.
– Redeeming all funds in panic without strategy.

» Final Insights

– You’ve done well by building multiple assets in India.
– Now, being in the US, the rules are different.
– Tax in India is still clear and manageable with proper planning.
– But US tax laws are complex and may penalise without correct reporting.
– Mutual fund redemptions, if needed, must be phased.
– PPF and FD should be left to mature unless urgent.
– Avoid direct and index funds now. Go only with active funds through a Certified Financial Planner.
– Don’t break investments without advice from both Indian CFP and US CPA.
– Review all assets, nominees, and goal alignment yearly.
– Keep your investment plan fluid and updated for your new life abroad.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment