Returning NRI: What Happens to Your Property, Accounts and Tax
When you move back to India for good, your Indian flat stays yours with no fresh permission needed, and any property you bought abroad while an NRI can be kept under section 6(4) of FEMA. What changes is the paperwork around it: your NRE and NRO accounts must become resident accounts, tenants and buyers must switch from 31.2% or 14.95% TDS to resident rates, and your lender must be told.
Key takeaways
- Under FEMA you become resident from the day you return intending to stay. RBI expects NRE accounts to be redesignated as resident accounts, or moved into an RFC account, straight away.
- FCNR deposits can run to maturity. Their interest stays tax-free while you are RNOR, according to most guides.
- Foreign property, shares and accounts you built up abroad can be kept. Once you become ordinarily resident for tax, they go in Schedule FA every year.
- Tax residency is decided for the whole April-March year by day count, so the year you land can still be a non-resident year for income tax.
- A sale by a resident carries 1% TDS instead of up to 14.95% of the price, which can move lakhs of rupees of cash flow.
Two different clocks: FEMA and income tax
FEMA looks at intent, not days. The day you come back to take up a job, run a business or settle, you are a person resident in India for banking and property rules. That is the trigger for redesignating accounts.
Income tax counts days across the tax year. You are resident if you spend 182 days or more in India, or 60 days in the year plus 365 days over the previous four years. Land on 1 October and stay, and October to March is 182 days (183 in a leap year), so you are resident that year. Land in November and you may still be a non-resident for tax, while already resident under FEMA.
Once resident for tax, most returnees are first "resident but not ordinarily resident" (RNOR) for a year or two, which keeps foreign income out of Indian tax. The tests are summed up in our guide for NRIs buying property in Dubai.
Your bank accounts, one by one
| Account you hold | What happens on return | Tax after return |
|---|---|---|
| NRE savings | Redesignate as resident savings, or move the balance to an RFC account, at once | Interest loses its NRI exemption from the date you return |
| NRE fixed deposit | Banks usually let it run to maturity, then redesignate | Interest taxable as a resident's |
| NRO savings and deposits | Redesignate as ordinary resident accounts | No change: always taxable |
| FCNR(B) deposit | May be held to maturity, then paid into an RFC or resident account | Exempt while you are NRI or RNOR, per most sources |
| Foreign bank account | May be kept under FEMA s.6(4) | Reported in Schedule FA once you are ordinarily resident |
RBI's wording is "immediately"; practitioners suggest writing to every bank within about 30 days. An NRE account still marked non-resident a year later is a FEMA breach.
Why an RFC account matters to a property owner
A Resident Foreign Currency account holds dollars, pounds or euros that came from your time abroad, and its balance can be sent out again without counting against the Liberalised Remittance Scheme limit. Banks generally ask that you lived abroad for at least a year. If you may buy abroad later or still pay an overseas mortgage, keep the foreign money here.
Property you own in India
Nothing needs re-registering. The flat you bought as an NRI is simply a resident's flat now. But three people who deal with you must be told.
Your tenant
While you were an NRI, the tenant deducted 31.2% of the rent under section 393(2) of the Income-tax Act, 2025 (old section 195). As a resident, an individual tenant deducts only 2% under section 393(1), and only if the rent is above Rs 50,000 a month, paying through the PAN-based Form 141 with no TAN. Give the tenant a written note of your changed status and the date it applies from. Because tax residency is a whole-year test, agree the switch date with your CA; if the year turns out to be a non-resident year, you can't claim the lower rate for it. The NRI side of this is in our guide to NRI rental income tax.
A buyer, if you plan to sell
Only the seller's status decides the TDS on a property sale. From an NRI, a buyer must deduct on the full price at 12.5% plus surcharge and cess on long-term gains, up to 14.95%, from the first rupee. From a resident, it is 1% on sales of Rs 50 lakh or more. See the gain itself in our capital gains guide.
Your lender
Tell the bank that holds your home loan in writing and update your KYC. NRI loans are often priced 0.1 to 0.5 percentage points above resident loans, and some banks move you to resident terms on request. If yours won't, a balance transfer after six to twelve months of Indian income and credit history can help; our note on when a balance transfer saves money has the arithmetic. EMIs can now come from your resident account instead of NRE or NRO. How NRI loans work before the switch is in home loan for NRIs.
A worked example: what the switch is worth
You return from Toronto in June and stay, so you will be in India well over 182 days this tax year. You own a Bengaluru flat let at Rs 60,000 a month to an individual, and plan to sell a second flat in Hyderabad for Rs 1.2 crore, a long-term holding.
| Item | As an NRI | As a resident |
|---|---|---|
| TDS on rent, monthly | Rs 18,720 (31.2%) | Rs 1,200 (2%) |
| TDS on rent, yearly | Rs 2,24,640 | Rs 14,400 |
| TDS on the Rs 1.2 crore sale | Rs 17,94,000 (14.95%) | Rs 1,20,000 (1%) |
| Total held back at source | Rs 20,18,640 | Rs 1,34,400 |
TDS is not the final tax, and the capital gains tax is the same either way. But as an NRI, most of Rs 20,18,640 would sit with the government until a refund, unless you first got a lower deduction certificate.
Money headed abroad after you're back
The NRI routes for taking sale money out, including the USD 1 million a year from an NRO account, are for non-residents. Once resident, money you send abroad generally falls under the Liberalised Remittance Scheme, capped at USD 250,000 a year. So if you expect to sell an Indian flat and move the money overseas, compare doing it before you return with doing it after. Your RFC balance is the exception: it came from abroad and can go back.
Property abroad, and the reporting that follows
FEMA section 6(4) lets a resident hold, own, transfer or invest in foreign currency, securities or property acquired while non-resident. You needn't sell your flat in London or Dubai. Rent from it can be kept abroad.
The tax side catches up later. While you are RNOR, foreign income earned and received abroad is outside Indian tax and Schedule FA doesn't apply. From the first year you are resident and ordinarily resident, your worldwide income is taxable, and every foreign asset, including a flat, a bank account with a nil balance or a pension plan, goes in Schedule FA. Leaving one out can attract a flat Rs 10 lakh penalty a year under the Black Money Act. Use the RNOR years to decide what to keep.
Where returnees slip up
- Leaving NRE accounts as they are. The interest is taxable from your return, whatever the bank's label says, and the account is out of line with FEMA.
- Telling a tenant too early. If your year ends as a non-resident year, 2% TDS was the wrong rate and the tenant faces a default.
- Forgetting the RNOR end date. Schedule FA starts the year you become ordinarily resident, and one missed disclosure can cost more than the asset earns.
- Assuming nothing changes on land. As a resident you may now buy farmland where state law allows, which NRIs can't; see NRIs and agricultural land.
If you are leaving rather than coming back, the steps run the other way; see our checklist for becoming an NRI.
Frequently asked questions
Do I have to sell my flat abroad when I move back to India?
No. Section 6(4) of FEMA lets a resident keep foreign property, bank accounts and investments acquired while living abroad, and even sell or transfer them later. What you must do is report them in Schedule FA of your return from the first year you are resident and ordinarily resident, and pay Indian tax on the rent from then on.
When should I tell my tenant I am no longer an NRI?
Once it is clear you will be resident for income tax for the whole year, usually because you will spend 182 days or more in India. Give the tenant a written note with the effective date. Switching too early is risky: if you end the year as a non-resident, the tenant should have deducted 31.2%, not 2%.
Can I keep my FCNR deposit after returning?
Yes, until it matures. Banks allow FCNR(B) deposits to run to their end date, and most sources say the interest stays tax-free while you are NRI or RNOR. On maturity the money moves to an RFC account, if you want to keep it in foreign currency, or to a resident rupee account. Breaking it early usually costs interest for no gain.
Will my NRI home loan become a resident loan automatically?
No. You have to tell the lender in writing and update your KYC. Some banks move the loan to resident terms, which are often slightly cheaper; others don't. If yours won't reprice, a balance transfer to another lender once you have Indian income and a few months of repayment history as a resident is the usual route.
Is it better to sell my Indian flat before or after I return?
It depends on where the money is going. If it stays in India, selling as a resident means only 1% TDS against up to 14.95% as an NRI. If you want the money abroad, NRI repatriation routes allow up to USD 1 million a year, while a resident is generally limited to USD 250,000 under the Liberalised Remittance Scheme.
If you're planning a move home and want to sort out a flat you own, rent out or plan to sell, the Realty Hunting team is happy to talk it through.
