A Guide for NRIs Returning to India from UAE

Moving back to India after living in the UAE is a significant life change that includes both emotional and practical aspects. It's more than just relocating from one nation to another; it's about going back to your roots while adjusting financially, emotionally, and professionally. No matter where you have been living in Dubai, planning your return to India as an NRI needs careful planning and prepration.

From understanding your residential status and taxation to managing your NRE/NRO account and repatriating savings. There are several aspects to consider when moving back to India from the UAE to ensure a smooth transition. In this guide, we will cover everything you need to know about returning to India from the UAE. After reading the blog, you can plan your return confidently and avoid any financial or compliance issues.

Why NRIs Return to India from the UAE?

An NRI might have several reasons to return to India from the UAE. The reasons may vary, but mostly it revolves around family, long-term security, low-cost living, and the desire for belonging.

Common Reasons for Returning

Here are some of the common reasons for an NRI deciding to move back to India from the UAE:

• Family and Emotional Ties: The most common reasons for many NRIs to move back to India are to reunite with their families. More specifically, to take care of their aging parents or sometimes even to raise their children around their cultural roots and extended family.
• Planning Retirement: Many NRIs plan their retirement in India as returning home for them means peace, familiarity, and access to extended family support.
• Career Options: India has a fast-paced economy that offers emerging options in technology, finance, and entrepreneurship. Many professionals see India as a strong destination to build their career after spending years abroad.
• High Standard of Living: Although the UAE offers high standards of living and tax-free income, other expenses like the cost of housing, schooling, and health care can be pricey. Retiring or settling in India can be more affordable and comfortable as compared to the UAE.

Understanding Your Residential Status After Returning

After your return to India, one essential thing you must do is to determine your residential status under Indian tax laws. Your tax liability will depend on the duration you have spent in India during a financial year.

Tax Residency Categories

Under the Income Tax Act, 1961, an individual can be classified into three categories:

• Non-Resident (NR): Taxed only on the income sourced in India.
• Resident but Not Ordinarily Resident (RNOR): Taxed on Indian income and limited foreign income.
• Resident and Ordinarily Resident (ROR): Taxed on their global income.

Initially, most of the NRIs qualify as RNOR for up to two years. During this period, you can claim tax relief as your foreign income is not taxed immediately in India, such as a UAE salary or savings.

Residency Rules and Timelines

You will be deemed a resident if you:

• Stay in India for 182 days or more in a financial year, or
• Stay 60 days or more in India in the current year or 365 days or more in the preceding four years.

You will qualify as RNOR if you:

• Have been a non-resident for 0 out of the previous 10 years, or
• Have spent less than 729 days in India during the last 7 years.

Tax Implications for Returning NRIs from the UAE

The UAE is a tax-free jurisdiction, meaning NRIs staying there don't need to pay personal income tax. However, after moving back to India, your income and assets will be taxed under Indian taxation depending on your residency status.

Foreign Income and Global Assets

• Your foreign income remains tax-exempt in India during your RNOR period.
• Once you get the ROR status, your global income will be taxed in India, including salary, savings, or property income received from the UAE.

DTAA Between India and the UAE

Even though the UAE doesn't charge any personal income tax, the India-UAE DTAA (Double Taxation Avoidance Agreement) ensures that NRIs don't face double taxation on some income, such as dividends, interest, and royalties.

You get the option to claim a tax credit in India under the DTAA, provided you have already paid taxes on such income in the UAE. For example, on certain investments, earnings.

Banking, Repatriation, and Account Conversion

After a change in your residential status to a resident Indian, you need to update your banking arrangements in accordance with the RBI guidelines.

Conversion of NRE, NRO, FCNR, and RFC Accounts

When you become a resident Indian, you must:

• Convert NRE and FCNR accounts into resident rupee accounts.
• Keep using your NRO account for income sourced in India, such as rent or dividends.
• You may open a Resident Foreign Currency (RFC) account to hold funds in foreign currency, like AED or USD. It will help you have flexibility for travel or expenses incurred abroad.

Tips for Repatriating Funds from the UAE to India

You need careful planning when transferring your savings from the UAE to India to ensure compliance with the regulations of both nations:

Key Tips

• Repatriate funds using official banking channels like SWIFT or exchange houses approved by the UAE Central Bank.
• Before your residential status changes to "resident", ensure to complete all the major transfers to ease compliance.
• Maintain all the documents to use for future reference during Indian tax assessments, including salary slips, tax-free certificates, and transfer records.

Investments, Property, and Estate Planning

After returning, managing your assets in both nations becomes an essential part of your financial planning.

Handling UAE Investments and Property

If you own a property or investment in the UAE, you can either:

• Keep them and earn rent on investment returns (reportable after RNOR period concludes), or
• Sell them and transfer the proceeds acquired before moving to simplify compliance.

UAE-based end-of-service benefits (gratuity) can also be claimed tax-free in the UAE. However, once you get the status of an Indian resident, these amounts may be subject to taxation, unless transferred beforehand.

Investing in India

Upon return, you can explore:

• Mutual funds and SIPs for long-term growth.
• Real estate in developing cities for capital appreciation.
• PPF, NPS, and Fixed Deposits to receive stable and tax-efficient income.

Residency Status and Inheritance Planning

To reflect your new residency status, you must update your wills, nominations, and power of attorney (POA). It includes both India and UAE assets in your estate plan to ensure easy inheritance.

Additionally, dual-country estate planning is advisable if your family or dependents are in both nations.

Practical Checklist Before and After the Return

Consider this pre-return and post-return checklist to ensure that you stay compliant before leaving the UAE and after arriving in India.

Pre-Return Checklist

Here are the things to do before leaving the UAE:

• Settle your end-of-service benefits or gratuity.
• Gather property, investment, and employment records.
• Close or update your local bank accounts and utility connections.
• Notify your employer and financial institutions regarding your departure.
• If applicable, make sure that all your UAE tax and compliance documents are in order.

Post-Return Checklist

Here are the things you need to do once you have arrived in India:

• If you qualify as ROR, report all your foreign assets.
• Convert NRE/NRO/FCNR accounts to resident accounts.
• Update PAN, Aadhar, and KYC with new address details.
• File your first Indian tax return as a returning resident.
• Inform the banks, mutual funds, and other entities regarding the change in your residency status.

The Bottom Line

Moving back to India from the UAE is a life-changing journey, emotionally, financially, and culturally. Reconnecting with your family and adapting to life back home can be exciting, but you must not forget to plan everything to ensure a smooth and compliant transition.

Take sufficient time to plan everything carefully and enjoy the new opportunities that await you. Additionally, consider seeking help from an expert to navigate the financial and legal complexities easily. One such expert is Savetaxs.

At Savetaxs, we have a team of expert CAs and professionals, working 24*7 to assist NRIs with all their legal, financial, and tax issues. We can guide you when you decide to move back from the UAE to India in determining your residential status, converting your bank accounts, filing NRI ITR, and much more.

Contact us today, and enjoy utmost convenience and highest quality service, all while sitting in the comfort of your home.