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NRI with Investments: How Can I Smoothly Transfer Funds to India?

Ramalingam Kalirajan |6992 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Sep 17, 2024

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more

Question by rudolf on Sep 14, 2024Hindi

Dear Sir, i am an NRI, investing in mutual funds and stocks through NRO account for quite some time and i am planning to move to india approximately in another 2-3 years of time , given that NRO have high taxation, i just wanted to understand how to swiftly transfer mutual funds and taxes from nro account to indian resident account ? Appreciate if you could provide advice ?

Ans: Transitioning from NRI to a resident status with regard to your mutual fund and stock investments is a common scenario and can be managed smoothly with the right steps. Let’s break down the process and address your concerns about taxation and how to transfer your investments seamlessly.

Key Steps for Transitioning from NRO to Resident Account
Update Your Residential Status with Fund Houses and Brokers

As you plan to return to India and will no longer hold NRI status, it is essential to update your KYC (Know Your Customer) details with all the mutual fund houses and stockbrokers.

Inform your fund houses and stock brokers that your residential status is changing. Provide them with a fresh KYC form, updated PAN card, and your new resident bank account details.

Ensure all your investments reflect your new status as a resident. This will also apply to your Demat account if you are holding stocks in electronic form.

Key Action: Submit KYC update forms with new address, PAN, and bank account details.

Open a Resident Savings Account

Before you move back, or soon after, open a regular savings account in India (Resident Individual account). This will replace your NRO account for all future transactions.

You can link this new savings account to your mutual funds and stocks once your residential status is updated.

Ensure that you close the NRO account when it is no longer needed to avoid confusion in future transactions.

Key Action: Open a resident savings account and link it to your investments.

Transfer of Mutual Funds

For mutual funds, transferring from NRO to a resident savings account is straightforward. Once your KYC is updated with the resident status and your new bank account is linked, you don’t need to redeem your mutual funds.

Your mutual fund investments can continue as they are, without any impact on the performance or holding period, but the taxation will change to that applicable to Indian residents.

Key Action: Update bank details without redeeming or withdrawing funds to avoid tax implications.

Tax Implications and TDS on NRO Account

Currently, income earned in your NRO account, including dividends and capital gains, is subject to higher tax rates (20-30%) and TDS (Tax Deducted at Source).

Once you become a resident, you will be taxed as per resident tax slabs, which may significantly reduce your tax outgo, especially on long-term capital gains.

After updating your status, ensure you inform your fund houses and brokers about the same to avoid continued high TDS deductions under NRO norms.

Key Action: Ensure all transactions reflect your new tax residency status to reduce tax deductions.

Important Considerations
Capital Gains Taxation: After becoming a resident, your long-term capital gains (LTCG) on equity mutual funds and stocks will be taxed at 10% for gains above Rs 1 lakh annually, which is lower than the NRO taxation. Short-term gains (held for less than a year) will be taxed at 15%.

Dividends: Dividends received from mutual funds and stocks will be taxed as per your tax slab as a resident. This could also reduce your tax burden as compared to the flat rate for NRIs.

Form 15H/15G: As a resident, you can submit Form 15H/15G to your bank and fund houses to avoid unnecessary TDS deductions if your income is below the taxable limit.

Final Insights
Your plan to shift to India in the next 2-3 years requires some well-timed steps, but it can be done without hassle. By updating your KYC, linking your resident savings account, and staying on top of the tax changes, you can transition smoothly from an NRO account to a resident account.

Take the opportunity to review your portfolio during this transition, ensuring it aligns with your financial goals as a resident Indian investor. If your income becomes taxable in India, adjusting your portfolio and rebalancing for tax efficiency could be wise.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,
www.holisticinvestment.in

Asked on - Sep 18, 2024 | Answered on Sep 18, 2024

thank you Sir for you kind response. much appreciated

Ans: You're welcome! If you have any more questions or need further assistance, feel free to ask. Best wishes on your financial journey!

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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