I am an NRI. So far I have not filed any income tax. My Indian income is INR 19000 per month through rental income.

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?

Ans: Tax Implications on ETFs and Swing Trading: As an NRI, any income earned from securities transactions in India, including ETFs and swing trading, is subject to taxation. Short-term capital gains (STCG) from equity investments held for less than one year are taxed at 15% plus applicable surcharge and cess. However, if you become a resident Indian again, you'll be taxed as per the resident Indian tax laws, which include LTCG tax of 10% on equity investments held for over one year. It's essential to consult with a tax advisor to understand the specific implications of swing trading on your tax liability as an NRI.

NRE FDs vs. Small Finance Banks FDs: NRE fixed deposits offer the advantage of tax-free interest income and full repatriation of funds, making them an attractive option for NRIs. However, you rightly pointed out that if your residential status changes to resident Indian within 1-2 years, the interest rate and taxation will be recalculated based on resident rates. In such cases, investing in FDs of small finance banks with higher interest rates can be a viable alternative. While the interest earned above ?40,000 is subject to a 10% TDS, it's essential to consider factors like liquidity, safety, and the bank's credit rating before investing. Evaluate the interest rate differential and potential tax implications to make an informed decision based on your financial goals and risk tolerance.

Considering your investment horizon and financial objectives, it's advisable to consult with a financial advisor or tax consultant who can provide personalized guidance based on your specific situation and help optimize your investment strategy.

Best Regards,

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

Ans: The statement you found is mostly correct. Here's a breakdown of tax implications for NRIs in India:

Basic Exemption Limit:

Yes, NRIs are eligible for a basic exemption limit of ?2.5 lakhs on their total taxable income earned in India during a financial year. This means if your income from Indian sources (including bank deposits, shares, mutual funds, but excluding PPF interest) is less than ?2.5 lakhs, you generally don't need to pay taxes or file an income tax return in India.
Taxable Income for NRIs:

Interest income earned on NRO accounts is taxable in India.
Dividend income from Indian companies is generally taxable in India at a rate of 20% (plus surcharge and cess if applicable).
Capital gains from selling shares or equity mutual funds in India are taxable depending on the type and holding period of the investment.
Rental income from property in India is taxable.
NRIs and PPF:

NRIs cannot open new PPF accounts, but they can continue to contribute to existing PPF accounts opened while they were resident Indians.
The good news is that interest income earned on PPF and the maturity amount are completely tax-free for everyone, regardless of residential status.
Filing Income Tax Returns:

Even if your total income is below ?2.5 lakhs, you might still need to file an income tax return in India if you want to claim a tax refund on TDS (Tax Deducted at Source) deducted from your income, such as on interest from NRO accounts.
NRIs are advised to consult with a qualified tax advisor or chartered accountant familiar with NRI taxation to determine their filing requirements and tax liabilities.
In summary, while the ?2.5 lakh limit is a general guideline, it's important to consider all your income sources in India and the specific tax treatment of each to determine your tax filing obligations.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: Having recently transitioned from being an NRI to a resident Indian, you need to reassess your financial strategy. Your situation includes Rs 20 lakhs in an NRE account and ordinary non-NRI accounts in other banks. Let's explore what steps you should take and the tax implications involved.

First, commend yourself for keeping track of your financial assets. Transitioning from NRI to resident status involves several adjustments, and you are on the right path by seeking guidance.

Transitioning Your Accounts
NRE Account
As a non-resident Indian, you were eligible to hold an NRE account. Now, as a resident, it is essential to convert your NRE account to a resident account. Here are the steps:

Inform the Bank: Notify your bank about your change in residential status.
Convert the Account: The bank will help convert your NRE account to a resident savings account or an RFC (Resident Foreign Currency) account, if applicable.
Ordinary Non-NRI Accounts
You already have ordinary non-NRI accounts, which is good. Ensure that all your accounts reflect your current residential status correctly to avoid any legal or tax issues.

Tax Implications
Interest on NRE Account
When you were an NRI, the interest earned on the NRE account was tax-free in India. As a resident, the interest income from these accounts becomes taxable. Here's how it will be taxed:

Interest Income: Interest earned on the converted NRE account will be added to your total income.
Taxation: This interest income will be taxed as per your applicable income tax slab rates.
Ordinary Non-NRI Accounts
The interest earned on your ordinary non-NRI accounts is taxable. Ensure you report this income in your annual tax returns.

Investment Strategy
Now that your status has changed, it's time to revisit your investment strategy. Here's how you can effectively manage and grow your Rs 20 lakhs:

Systematic Investment Plan (SIP)
Investing in SIPs can be a good way to grow your funds over time. SIPs provide the benefit of rupee cost averaging and compound interest.

Diversified Portfolio
Diversifying your investments can help balance risk and returns. Consider a mix of:

Equity Funds: For long-term growth.
Debt Funds: For stability and regular income.
Hybrid Funds: For a balanced approach.
Fixed Deposits
While FDs provide security, they generally offer lower returns. Allocate a portion of your funds here for stability and liquidity.

Tax-Efficient Instruments
Consider investing in tax-efficient instruments such as:

ELSS (Equity Linked Savings Scheme): These funds offer tax benefits under Section 80C and have the potential for high returns.
PPF (Public Provident Fund): Offers tax benefits and long-term savings.
Financial Planning
Regular Review
Regularly review your financial portfolio to ensure it aligns with your goals and changing market conditions.

Certified Financial Planner (CFP)
Working with a CFP can provide personalized advice, periodic portfolio reviews, and help with rebalancing your investments.

Staying Informed
Financial Literacy
Continue educating yourself about financial products and market trends. This empowers you to make informed decisions and enhances your financial planning.

Compliance and Reporting
Income Tax Returns
Ensure you report all your income, including interest from all accounts, in your income tax returns. This compliance is crucial to avoid any penalties or legal issues.

Foreign Income
If you have any foreign income or assets, ensure they are reported correctly in your tax returns.

Final Insights
Transitioning from NRI to resident status involves significant financial adjustments. Converting your NRE account, reassessing your investment strategy, and understanding the tax implications are crucial steps. Regular reviews and working with a Certified Financial Planner will help optimize your financial health. Stay informed, compliant, and strategic in your financial planning to achieve your financial goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in