India–UAE Retirement Planning for NRIs

Have you thought about what your life will be like after retirement? Many people don't think about it, and this is where they make a mistake. Retirement planning remains important, and it becomes even more crucial for NRIs living in the UAE. Sounds confusing, right? Proper retirement planning for NRIs in the UAE helps secure their financial future. It helps you live in your desired country, maintain your preferred lifestyle, and stay financially independent even after retirement.

But how does retirement planning work? The simple answer is that it depends on your preferences. Based on this, you decide on the country, lifestyle, expenses, and tax obligations.

Want a detailed overview of it? Read the blog and know how to plan your life after retirement.

Decide Whether You Will Retire in India or the UAE

The most crucial step in retirement planning for NRIs in the UAE is deciding which country they want to live in after retirement. This can vary from person to person, as everyone has their own preferences and choices. To provide an overview, let's compare the lifestyle both countries offer to people:

This was just an overview of your life after retirement in India and the UAE. Moving forward, let's determine which country is best for retirement based on your investment and retirement plans.

Investment Options for Retirement Planning for NRIs in UAE and India

Both countries offer different investment options for NRI retirement planning. These are as follows:

Retirement Investment Options in India

Globally, India continues to grow and evolve. The country offers several investment options to NRIs. Considering this, here are some of the most popular retirement plans for NRIs in India:

• National Pension System (NPS): A PFRDA-regulated pension scheme available to NRIs aged 18 to 85 through Tier I accounts. Based on your risk profile, you can opt for equity, government securities, debt, and corporate bonds.
• Mutual Funds: Through NRE or NRO accounts, NRIs can invest in Indian debt and equity mutual funds, subject to applicable rules and fund charges. This provides you with exposure to the Indian market.
• NRE/NRO Fixed Deposits: This investment option offers predictable interest and capital stability.
• Real Estate and REITs: NRIs are permitted to buy residential and commercial properties in India, subject to applicable FEMA rules and restrictions on agricultural land, plantation property, and farm houses. From it, you can earn rental income and long-term appreciation. In contrast, REITs operate like listed investment vehicles providing exposure to income-generating real estate.

Retirement Investment Options in the UAE

Talking about retirement planning for NRIs in the UAE, knowing the available investment options is vital. Unlike India, the UAE does not offer a government pension system to NRIs. So you need to rely on private retirement schemes available in the country. Available options include:

• Private Pension Plans: These investments are provided by financial institutions or employers to NRIs. These plans let UAE NRIs build a retirement corpus in the country.
• Investment-Linked Schemes: Under these schemes, you can invest in mutual funds, stocks, or bonds. Through this, you can grow your wealth based on market performance over time.
• Insurance-Backed Plans: These plans combine life insurance with investment opportunities. The insurance-backed plans offer both potential growth and protection.

Although the country does not offer a pension scheme for expatriates, it provides end-of-service UAE gratuity. Article 51 of the UAE Labor Law caps the total gratuity at two years' wage. The gratuity is calculated based on the last basic wage, using 21 days for each of the first five years and 30 days for each additional year, subject to the applicable rules.
These are the retirement investment options available for NRIs in both countries. Moving further, let's learn about the tax obligations.

Tax Obligations in India and the UAE for NRIs

India and the UAE both have their own regulations and tax systems; here is how it works for NRIs.

Indian Tax Obligations for NRIs

Returning to India for tax purposes does not make you a resident on the day you arrive there. Considering this, your tax status in India depends on factors such as how many days you live in the country and your residence history. Here is how it works:

• When You Remain an NRI: If you are an NRI, you are generally liable to pay tax in India on income received or deemed to be received in India or income that accrues, arises, or is deemed to accrue or arise in India. This includes:
• Capital gains generated from Indian investments
• Rent from Indian property
• Dividends
• Business income linked with India
• Interest from taxable Indian accounts
• Pension arising from India
• After Becoming ROR: Once your residential status changes from NRI to ROR (Resident and Ordinarily Resident), you must pay tax in India on your global income. It includes both your Indian and UAE investments, income, rent, dividends, and capital gains. However, if you qualify as RNOR (Resident but Not Ordinarily Resident), the tax treatment of foreign income is different.

UAE Tax Obligations

The UAE does not impose personal tax on individuals. So you are not obliged to pay tax on your salary and investments there. Considering this, even if you decide to retire in the UAE, you do not need to pay personal income tax here on your Indian investments and capital gains. However, Indian tax may still apply to income from your Indian investments under Indian tax rules.

These are the tax obligations that NRIs face after retirement in India and the UAE. Next, let's look at a few points to consider when planning for retirement in India as an NRI.

Retirement Planning in India for NRIs

If you plan to retire in India after years of living in the UAE, consider the following points:

You Need to Change Your NRI Bank Accounts

Once you return to India permanently and your FEMA residential status changes, you need to redesignate your NRI accounts. In simple terms, after moving to India, you need to redesignate your NRO account as a resident account, while your NRE account should be redesignated as a resident account or the funds may be transferred to an RFC account. In addition, before returning, do the following:

• Inform your bank about your tax status change
• Check deposit maturity dates
• List standing instructions and linked investments
• Review nominations and joint holders
• Preserve inward-remittance records
• Avoid routing new transactions through the wrong account
• Plan eligible foreign-currency holdings

You can also hold an FCNR deposit without converting it until its maturity date.

Do Not Forget Your UAE Investments

Once you permanently return to India and become an ROR, you generally need to report your applicable foreign assets and income in your ITR. The Income Tax Department of India clearly states the financial interests, overseas bank accounts, property, and other foreign assets you need to disclose.

Decide Where Your Retirement Income Will Come From

When returning to India, you may have a UAE pension, retirement savings, Indian investments, and rental income across several accounts. Decide which account you'll use for your Indian expenses and how much you'll keep overseas. Considering this, you can divide your retirement money into three categories:

• Money needed after retirement
• Money needed during the middle of the retirement years
• Money that you will use later on

The first option needs accessibility and stability, while the other two options may remain aside for investment fluctuations, as they have more time.

For a brief overview of investment allocation between India and the UAE, read our blog, "How to Allocate Investments Between India and the UAE."

Plan Retirement Withdrawals and Regular Income

Your retirement plan is incomplete without your withdrawal strategy. Plan your strategy so you get reliable income without selling long-term assets during market fluctuations. In these circumstances, one practical strategy you can opt for includes:

• Having an emergency reserve
• Keeping short-term reserves for spending
• Medium-term spending reserve
• Long-term growth assets

The amount you keep in each mentioned category depends on age, health, family support, pension, and risk capacity.

Decide Which Currency Will Fund Each Expense

Currency fluctuation is another important factor in retirement planning for NRIs in the UAE. This is because exchange rates constantly change, which further affects investment returns. To avoid this, when planning your retirement in India, use INR for Indian expenses and AED for UAE expenses. This reduces frequent conversions and reliance on foreign exchange rates.

These are the key things you should consider when planning for retirement in India as an NRI.

Final Thoughts

Lastly, effective retirement planning for NRIs in UAE and India starts with deciding which country to settle in. According to that, NRIs need to plan their retirement strategy. This is because both countries have different taxation systems, rules, and regulations. Remember that the best retirement planning depends not only on your investment portfolio but also on how you use those funds after retirement. Whether you choose India or the UAE, both countries offer different retirement and investment options.

If you are facing issues in retirement planning and need help, connect with Savetaxs. Our team of cross-border experts will help you choose the right country as per your financial goals, lifestyle, and investment strategy.