Financial Planner - Answered on Aug 26, 2022
I am having a resident demat account and having stocks. I have few MFs for which money is deducted from my wife's resident bank account. My wife is not working and she is with me. I am also having SSY for my daughters and continuing.
Is it okay to have the above accounts being an NRI? Can you please advise course correction if needed?
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After you return to India, any interest earned on NRE account will be taxable. You can opt to transfer your funds from NRE account to RFC account upon return
Though there are no specific products for returning NRIs, there are a whole range of investment options available for you apart from Bank Deposits. The most common are mutual funds, bonds, stocks, insurance, etc. You can choose to invest based on factors that suit you including risk, return, liquidity, etc. Options like PPF that are not available for NRIs become available when your status changes to Resident Indian.
You can always check status at calculator provided at income tax website (external link)
Accordingly, you should inform bank about change in residential status immediately and change the type of account (NRO/NRE Account).
Also you have to open account as resident for MF and tax implications will arise at the time of transfer of mutual fund units. Tax rate will depend on type of fund (equity based or debt based) and period of holding.
Mutual funds whose portfolio’s equity exposure exceeds 65% are equity funds.
Equity funds held for 12 months or more are considered as long term, whereas it is 36 months in case of debt funds.
Short term equity funds are taxed at 15% and debt funds are taxed at slab rate.
Long term equity funds are taxed at 10% (if capital gains of exceeds Rs 1 lakh) and debt funds are taxed at 20% after indexation.