Watch: NRI Financial Planning - FCNR, RNOR, 401k, Remittance, Double Taxation back to India

3:20 Country and they literally don't have time to adjust themselves it's just not returning to Mother India there are people who migrate from one territory to the other other territory yeah then when they move from one territory to the other territory be it from us to India or UK to India UK to Middle East or whatever it is it has its set of tax tax issues which get involved in this then you have the issue of acclimatization there are people who come back post their retirement okay I've served for 55 60 years in Dubai or in Oman or some middle east countries and I'll come back so that means you done now you are coming here for the retirement B purpose there are people who have gone abroad delivered service over there they are on an assignment and after 5 years 10 years they come back there are people who have gone to us and they didn't get their Green Card citizenship they can't cope up with the you know life over there they will come back there are people

4:21 Where husbands have gone there first and the wife goes later or the wi Versa whatever whichever it is so so the partner cannot adjust and they have to come back so there are multiple reasons why they are coming back so the best Cas scenario is it's just not that you have to plan before you go back from your country where you're working to India you should also think many times to become an NRA or not see many people do not understand how beautiful India is and see probably a 30,000 rupe salary in India today could be is as good as 2 lakh rupees salary elsewhere people do not realize and then they think that the life outside is very beautiful and they have the same thing as in India and they'll be up for root shock when they go abroad preparation is the key and that's quite elaborate over to you thanks so maybe

5:23 With that like if somebody has to move to India I'm just using that as an example and for different reasons as you outlined especially I want to

5:33 Have a very specific logistical question that comes to a lot of people people who are transferring money from abroad to a different country or in India are there some regulations or some guidelines that they need to follow or any good principles that they need to be aware of that could be helpful because people who are moving they need to transfer some of the financial assets also to that moving country let's take an example of India that the Indian rupee will depreciate that I transfer from there to India how does it get taxed that's another

6:34 Question how can I minimize my taxation what is the optimal ways I can bring my money into India if it is a liquid monies that you have held outside of India it's easy to move it out it's a click of the button that it can come inside India what if you had invested in some schemes which will mature into future like your 401 case in UK or hmrc pension in sorry 401 case in USA and hmrc pension in case of UK or some super Fund in Australia or Singapore so you can't take out that money immediately so how do I bring it what happens to the taxation one thing which people can definitely make best use of is a tax status called RN this is with reference to India now stands for Resident not ordinar resident r n o r in fact on our Channel n man

7:37 Clinic we have done detailed videos on what is RN who is eligible how can they can make best use of it what are the benefits you get it what are the pitfalls of it we have detailed videos I can give you the links of that you can show it on either on the screen or your description box people who are interested to get benefit out of it can click on the link link or they can just go to my channel click on returning NRI playlist and all these videos are showcased over there the advantage that is given here is nris have served outside and you're coming back to India so it's called a cooling off period because I'm coming to India all my Affairs outside of India cannot be settled in one go so government gives you a window of Maximum 2 years I use these words very carefully here I'm not a adviser of tax or I don't have a jurisdiction to say anything about the

8:37 Taxation so there are different faculties there are Chartered Accountants field it is and on my channel it's the Chartered Accountants who have spoken about it depending on how many years you have spent outside of India a maximum of two years is available as RN War Phase for you to come back and live in India if you bring your monies during your RN phase then any monies that you bring in from the residual assets that you have left behind it could be your end of service benefit it could be maturity proceeds of your investment it could be sale of your vehicle it could be the monies that somebody owes you and you collected or it could be sale of your assets then that money which comes into India during that two years RN phase it is taxfree in India it's taxfree in India people can click on this our videos on RN so we have given very very

9:39 Detailed guidelines likewise if you keep your Mone is in the fcnr account foreign currency non-resident accounts then the interest that you get on that fcnr accounts is taxfree in India during your RN phase instead of you converting into scnr account you convert your nfds into rupe account then the interest that you get from those resident FD accounts will be taxable in India whereas if you convert into fcnr hold it as an fcnr the interest what you get is tax free for the period of RNR which is maximum 2 years when I say maximum two years will everybody get two years no so somebody May someone may not get anything at all because they would have not stayed for that stipulated seven years or whatever the the the figures which have been

10:39 Given there then you will not have an RN face or you may be getting one year or you may be getting the maximum 2 years period to settle this issue so when you are coming you have to find out how much money I have to bring in how much money I leave outside of India that will decide how you have to bring in the money likewise you run into some issues some of the points of time for example you have 41 case USA in case of 401 case I think they mature by 59 and a half years yes yeah right after that you can take it out and if you take out prior to that then what happens is number one is penalty I'm told that there is a 10% penalty you can check from your CPA back in USA over there plus it'll be treated as your income in US when you withdraw it prior to 59 and a half years so there is a double problem there one exposing to penalty and treating as taxes but think

11:41 About a person who comes back to India by 35 years of his age or 40 years of age and he has no intention to go back to us is there a merit in keeping the money there till 15 half years so you have to sit with your financial planner chartered accountant or you have to sit with your spouse check what's happening in your life how do you want to treat it and you can take a call but if you have to move that money to India penalties cannot be avoided but to a great extent to the extent possible tax that you have to pay in USA can be managed because you don't have to withdraw that money when you are on the US soil where when you are living on active income there instead you come to India you have this RN pH at which time it will not get taxed in India and you withdraw in such a way that it'll be below the threshold limits in the USA some amount of tax management is possible there and you can reinvest this money in India and you have 15 20 30 years obviously the growth rate in India

12:41 Is far better in my assumption that could be a better solution for people who are coming from us having said that there is no solution for one solution fits everyone no there are many variant individual circumstances different people think that I will come back my father is not well mother is not well there is nobody to live here they are 85 I don't expect them to leave for long many years I'll spend 2 three years 5 years here once they are not there I'll go back to us so situationally you have to take a decision there are no easy answers around that yeah for sure there is no like one solution that fits for everyone everybody situation is a little bit different in terms of their long-term plans their risk approach their you know thought process no thanks for such a detailed aners so we will definitely share the links to the audience so that they can you know get better understanding of these information specifically about RN who qualifies the the qualification time

13:44 Period and so on just wanted to dive

13:47 A little bit in some of the points that you have mentioned if that's okay the first one is if we talk about the liquid money right so the money that you have in the bank so this is the money that that you have paid tax abroad so this is after tax money so there is no constraint of transferring that money or remitting that money back to India so are there any limits or are there any guidelines that they have to follow for this after tax money that they earned abroad or do they have to do it within RNR period or they have the flexibility due to like within 10 years 5 years 20 years whatever it is like depending on their own plan but the after tax money there are no restriction to bring the money you can bring all the money some amounts of money depending on what you have you can bring Millions together so there is no restrictions on inflow of money nor there is a time constraint you need not bring this money during the RN phase during RN phase if you bring it as I said you have an exemption of this in

14:49 India you could let's say that somebody has bought a pension plan outside of India that pension company gives him throughout his lifetime there is no way you can withdraw that money today so you can bring this money at some point of time in future now the question comes is why this doubt comes in somebody else's mind can I bring so much money there is no restriction to bringing the money there are restriction to take the money out from India right so there is nothing like that but nris have got this one Habit of I'm somebody different I should be treated in a different way I an NRA bring a Forex I should not be questioned that sometimes I personally feel is asking too much we are all common citizens of a country whether we live in India or some country in the world so the laws of land are same for everyone just because I'm somebody I'm an N yeah your God has been very kind to you you landed in one particular country you lived a good life

15:51 And you have a good earning doesn't mean that we have to have a different thing so the monies you bring in have to be explain a you owe an answer to the income tax officials you have not done anything wrong you can bring it through a proper Channel bring it through official banking channels as a part of housekeeping maintain records of how did you bring the money what is the source of the money this has to be kept in Mind questions can be asked naturally there are many nris who have not even shown their NRA status in the income tax department okay they file tax return their pan card status are the their income tax account does not even show n now imagine a situation they come back to India they are still stowing as resident and suddenly one day income tax department realizes that you have got so much of an asset is the department wrong in asking that question no it is doing its its

16:51 Part so how do I respond to it don't write it on the internet telling that oh we are being harassed this is a poor country you know we bring Forex we should not be questioned no maintain your records upload and always have a chartered accountant see the question is tax landscape keeps changing there are ways and means to handle a particular situation it's best you handle a professional see many people want to do it yourself there's nothing wrong in doing it yourself but there are places where things can get messy so you reply in a particular way it gives rise to interpretations at points of time and then you are asked to substantiate instead of that if there are professionals who do these things day in and day out they know where people will run into problem how things can be sorted out in a simple way it cost you a small amount of money that's that's unavoidable yeah that's unavoidable but that can save you a lot of trouble in future one housekeeping rule I always keep telling the NRA Community is

17:53 The day you go out of India even for the future NRS I'm telling this always always maintain every transaction that you have done outside of India every year at the end of that year draw the annual bank statement keep it in a mail folder keep it in multiple places with husband with wife because during that course if one of the person want to leave this world and there is an IT query which is coming in then everything can you know it can becomes very very messy ofair so maintain this housekeeping rules keep transaction if you have a job take from your HR the salaries that you have earned your banking transactions your employment letter the bonuses that you have got keep documentary evidence nobody's going to harass you that's for certain I know this I've lived outside myself for such a long period of time I never had one single day anybody questioning anything for me because we keep everything perfect even if somebody ask we have

18:53 Every document there there are so many of my customer one of my clients lived in Dubai and he comes back to India and an IT query gets raised because the flow of money and he could get everything we had sensitized him and we had prepared him for all that thing theem the the records were given to the IT department and the case got closed as simple as that yeah so prevention is far better you are answerable to the monies that come in there are no restrictions manage your taxation in consultation with your chartered accountant and your financial planner that's the message I can give okay great thank you very much

19:32 For clarifying that now switching to another one the topic that you mentioned is regarding the fcnr right like you know having the money I'm assuming in the foreign currency like you know while it can earn interest or whatnot is there any limitations again on the amount on the fcnr or how long you can hold the amount in the foreign currency before it has to be you know transferred or exchanged to Indian rupee any restrictions on that accounts there is no restriction on amount of fcnr money that you can hold but the taxfree status is only for the first two years of your RN again I'll be carefully using the word first you have to find out how long you have a eligibility to maintain RN status yeah as I said from 0 to maximum 2 years period you get it so 0 years one year or two years depending on how many years you have lived outside of India you'll get it the interest that you

20:34 Collect during that particular period in fcnr only will be taxfree during that now here is a crucial problem that will come you can book your fcnr for a 5 years period but the interest what you get for first two years only is taxfree for the remaining two years you have to pay taxes on the interest that you earn as well as currency gains if you make anything is also taxable for example you brought fcnr at today 83 rupees and 5 later fcnr matures and let's assume that the rup to dollar is 90 rupees so you are liable to pay taxes for the three years of interest that you have earn 2 years RN exemption given 3 years is the interest taxable and the currency gains which is from 83 to 90 rupees that will be computed and based on that you are liable to pay taxes on that NRS have

21:35 To remember one thing here if you have maintain nfds which are rup accounts while you come back you also have an option to convert this n fds into fcnr that option is also available you can exercise before you close your n accounts that option you can exercise but the question comes is you why why I'm doing this I'm doing it to save taxes in the process of saving taxes is there anything else you you have missed out the answer could be that yes instead of saving taxes probably you could explore other instruments where in which you have can get a better return you may have lesser taxes you may have deer taxes there is a role for planners here for sure right so there are no simple answers around it I told you what's possible there definitely I mean again I think I just want to keep reiterating so there is no like one answer that fits for everyone you just need to evaluate the different options the vehicles that are available

22:36 And need to work with a professional to understand what process or what plan suits well for an individual needs again the discussion here is to give some general guidelines this is not any recommendations for anyone so that people have the knowledge and then when they are working with the professionals to have enough information to understand these different ideas yeah yeah so I I know you kind of touched about the pension plans I know this is a very very very common question that a lot of people have especially I think you know the 401K the the super fund and the other one from the UK you mentioned about again utilizing from a tax planning from an ronr status this question is very very relevant I think people who comment on this is people who are like Indian citizens who are not a citizen of a foreign country and who has some chunk of money how they should plan like I don't know if it varies from a country to Country because you have work with different clients maybe

23:37 General framework or an idea I know it varies as you said earlier but just a a little bit more deeper information from different plans that could be helpful because this is a very common question that comes up almost like every day or if not every week I mean I think it just like you know a very common question from the people who are thinking about moving back to India what was your question you say that how do I move money from Pension funds held outside India into India or is it that how do you build your pensions in India so this question is how do they move pensions like you know the 401ks or super funds or when I say move what do they should what should they do like especially if it's an Indian citizen you know they're not citizen of the country they have some questions about like is it is the gains withheld at the non-residential status in the fall foreign country in abroad that's one common question and then also what they should plan I know you mentioned slightly about RN status where they can do some tax planning but after the tax planning would that if they

24:38 Withdraw some money would that be tax in India so you know some of these questions are very common across nris it's a very complex question to answer and again the answers are very very situational I we had done one episode on our Channel with one of the faculty from us who said that they have a system where in which they put it into Roth IRA Dan 401 case so it's we have done this many many years before I've forgotten the details of it where in which they said that it will become taxfree in India I'm not very sure because I'm not a tax expert it's the domain of Chartered Accountants it can be very messy one thing what is certain is that what ever taxes you pay in two different countries MH you can get a relief in another country for example you pay taxes in us or in UK and you live in

25:39 India and you're liable to tax because you're are a resident Indian it's coming from outside of India whatever the taxes you paid there you can take a relief in India on using the double tax avoidance agreement yeah and double tax avoidance Agreements are not common for every country they vary between country to Country the broad Contours could be same but within that there are there are lot of variations which are visible for example people who live in Middle East many of these countries have got a double tax aidance agreement where in which the capital gains what they make in mutual funds become taxfree for them as long as they live in those countries but I can't say the same thing with people who live in UK us whereas in case of Singapore citizens again they have a similar provision so it requires to be seen what is there in double tax avoidance agreements between India and the country in which you live

26:41 Make a list of beneficial factors and take benefit out of that and particularly in case of Canada us and UK we have done one detailed video on treatment of retirement income coming from there it's is quite complex chartered accountant shamra had referred to us there's a detailed video people may best refer to that on the guidance on that yeah we should we will definitely link that I mean I think that's another common question is about the retirement income while living in India how is that treated so I think that's great maybe Switching gears a little bit on

27:21 The insurance plans on the health insurance right I think people take term life insurance while they're in India or maybe while they're abroad so just wondering if that would cover whether you live abroad or in India or in a different country so that's a like a very general question and then also like maybe on the health insurance side any guidance you know people who are thinking about moving when they retire or when they get old maybe they might have to think a little bit about it early on so you know just any high level input or insights on these two broad topics I'll explain it in a simple possible way and people can look for the policies that they are holding let's first look at the life insurance you could have bought the life insurance in India or you could have bought the life insurance outside of India if you have bought the life insurance in India it covers you worldwide so there is no issue of anything happening anywhere and I have

28:22 Not noticed till now unless somebody specifically mentions in a policy so it is applicable worldwide if you have bought it outside India you have to check are there any restrictions around it for example we used to give people insurance policies from Dubai and that when the war periods of time the companies will put some restrictions okay I will not cover this if you have an intention to travel to Iraq or Iraq or Syria or whatever it is these are just the names I took it doesn't mean that it's thing likewise there are a lot of people who go from Dubai to African countries and some of the countries are not very safe to move beyond the Metros there so conditions can be put in there so you have to check if something were to happen to you outside of this safe zones how will you be considered but by and large nris who have purchased policies outside as long as it is a worldwide coverage

29:23 Anything that happens in India will be covered in the place where you have taken policy for example somebody takes a policy in USA or a UK and he comes and lives in India and death happens in India or critical illness happens in India it gets paid out in UK or USA But word of caution read through if there are any exclusion Clauses are given there I'm also given to understand that there are some policies which are in USA which say that we will cover you for death that happens in USA but it's not outside of USA I do not know I have not seen any policy document whether such conditions exist I have been told like this so it's a good idea if you have an intention to move out of the territories where you have been practicing your location or your employment are there any restrictive Clauses in your life insurance policy you must see that when it comes to question of health insurance again

30:24 Health insurance clearly defined under which territory the treatments are permitted now look at I lived in Dubai most policies return in Dubai will have might have conditions like anywhere in the world except us because the the cost of treatment is so high in USA to keep the the the premiums lower so the health insurance company would have thought that okay I'll not cover you in USA but you can go to UK you can go to another Eur Zone you can go to India you can go elsewhere if you have bought a health insurance in India companies will say you should leave inside India I will I'm fine to refund the money on your expenses if the treatment happens in India I will not refund this money which is happening outside of

31:19 India in India you have got the international policies they say that we cover your expenses if you have to go out for treatment outside of India again devil is in the detail yeah you have to read through the condition says that yes I will allow you to go for international treatment but these are the restrictions and you should fall ill in India if a person falls in India I will allow you to go outside now think about an NRI he lives in let's say in some country in Euro Zone and he buys a policy in India and he feels very comfortable that I have an international coverage unfortunately he fall sick in Euro Zone and he says that I'm eligible to claim under this policy the company will come and say that no not possible because the condition says you should fall in in India then you have an option to go outside of India for a treatment if you living outside of India I will not I will not allow so the devil is in

32:20 The details you have to find out what is allowed and what is not allowed like for most people who live in the Middle East now as a general rule if you have an employee a good company is generally cover you for Southeast eastern Southeastern countries which includes India Pakistan Bangladesh Thailand Philippines from where the workforce will come to the Middle East if something happens to them Southeastern countries are covered so an NRA he's working outside but he falls sick in India or or let's say that he fall sick in in Middle East countries he wants to come and take a treatment in India that's permitted yeah that's permitted sometimes what happens people are very conscious about the premium they pay for the health insurance they say that I don't want that I give me a policy with only covering Dubai only the companies will do it it will bring down the premium but when they have to

33:22 Shift then they will not be covered so health insurance policy is a min field and one has to be very careful and when it is given from one geography to another geography and there's another problem that might happen is you will not have a cash list admissions so the wordings will go like this on a fair price basis we will reimburse the amount that means let's say if that procedure costed 5,000 Dam in duai which is about a lak of rupe it it could be done for 30,000 rupees in India the insurance company says I'll reimburse you 30,000 rupees because that's customary price in India you pay the bill and then I'll reimburse that c yeah okay so so such things are there from a returning an perspective a few things they have to keep it in mind is that as long as your employer has given

34:22 You a cover yeah it's not only for returning NRS for any NRS for the matter you and you are happy with that stay with the health insurance you don't need a health insurance in India when should somebody consider buying a health insurance in India few conditions one 2 to 3 years before you come back to India reason there are conditions in the health insurance policies which will involve waiting periods right if you buy today and something happens and there could be waiting periods involved so you buy 2 to three years before those waiting periods are covered and by the time you come back to India those policies can be easily covered second condition when you have to buy is if somebody is having a pre-existing disease some chronic ailment arthritis diabetes blood pressure and you suspect because of progressive nature of these particular problems a health insurance company may may not give you me health insurance when I come back to India it's a good idea that you you bite at least 78

35:26 Years years or depending on your condition if you have to maintain it today you you buy it but don't buy an health insurance plan thinking that if I buy health insurance plan as a young person even when I become old I have to pay the same premium that's that's not the case that applies in case of life insurance which will go with the level premiums in case of health insurance the premiums will change as you move from one agean to another age band in the younger years it'll move at the 10 years age band 25 to 35 35 to 45 Beyond 45 5 years age band and Beyond certain point 60 65 years they move up by 65 years of age the only benefit is health insurance company cannot say that I will not renew a policy you have a policy it may ask you to pay an extra premium you just cannot say I will not cover you yes but if you are holding a health insurance policy knowing very well that it has no utility for you honestly speaking I personally feel it is donating money to

36:27 That company you know that you're not making a claim you're not making a claim how do we solve this particular problem one answer that I can tell people is that whether you can claim it or not whether you are going to come back to Indian one year or 5 years from now you maintain one top of health insurance policy a top of health insurance policy is let's say that you need a 25 lakhs cover and you tell the company I I don't want the first 5 lakh to be covered give me coverage which is beyond 5 lakh but cover me up to 25 LH yeah now what happens 90% of the cases will fall within the first five lak period insurance company has the law of large numbers they know which one will fall and which will not fall the cost of getting a topup plan is a fraction of what you pay for the regular plan what is the advantage Advantage is when you come back to India let anything happen

37:27 This stop up plan cannot be cancelled as long as you keep paying premium premium into it and the bigger health issues which will require massive Health expenditures cancers accident which requires multiple surgeries prolonged illness can very well be covered so smaller amounts you can take care from your savings or if you're lucky enough you'll get an health insurance policy you can cover it later at the same time you're making sure you unnecessarily not wasting your resources by purchasing a full full-fledged health insurance plan again on my channel we have done we call this as NRI dilemma should I have an health insurance plan in India today or when should I buy it it's a very popular episode which has run on our channel so people can refer to that channel yeah definitely lot of wealth of knowledge there I think we will be I'm sure a lot of people will check out the channel and we'll also post the

38:28 Links thanks very much for the detailed answer I'm also being very cognizant about the time so I know I think there's a lot more topics that you know the audience are interested I'm sure I think we can connect in the future episodes but I want to thank you very much for taking your time and sharing your wealth of knowledge talking to you know clients from 60 plus countries your 30 years of experience and guiding us through this right I mean so this is a big big decision for anyone you know whether you know moving to a different country or moving back to India and it requires some planning as you said it's always a good idea but you know the better the in knowledge they have that better they would be equipped in how to navigate through this decision so I think this is all very valuable information and and you know please check out the NRI money Clinic we'll post all the links in the description below where there's wealth of knowledge and more to get you know

39:28 Ex information and with that thank you very much for all your time and sharing your knowledge with us today thank you ainash and I look forward to interview on my channel as well because you have spoken to so many returning NRS I want to check the grass root level what actually happened why they came to India how did they adjust themselves to India what problems they can they came across and what could have made it much better had they planned it before I think you need to come on my channel as well my audience oh it would be my pleasure yeah definitely happy to share you know my interactions with the people who have returned and my own Journey more than happy to do that it would be my pleasure thank you thank you very much for this opportunity to exchange my views with your audience Ain wish you all the best in for your channel and for you in years ahead yeah thanks a lot thank you all for joining us on this

40:30 Insightful journey of Dy return if you enjoyed this episode and want to explore more stories and expert advice make sure to subscribe and hit the notification Bell don't forget to leave a comment below with your thoughts and experiences by the way check out the links in the description below for our Facebook group and social media for updates and engaging discussions as well as connecting with fellow the wrers thank you once again and until next time may your da journey be filled with joy growth and endless possibilities