The Complete NRI Legal Guide: Banking, Property, Tax and Estate Planning in India

Indian law uses different definitions of 'NRI' depending on which statute is being applied — and the definitions don't always align. Getting this right determines which rules apply to you.

Under FEMA: an NRI is an 'Indian citizen residing outside India' who is outside India for employment, business, or 'other circumstances indicating an intention to stay outside India for an uncertain period.' The trigger is intention to stay abroad — you can become an NRI in FEMA terms even in your first year abroad.

Under the Income Tax Act: residential status is determined annually by physical presence. You are Resident if you spend 182+ days in India in the financial year, or 60+ days in the year plus 365+ days across the preceding four years (with exceptions for Indian citizens visiting India). Otherwise, you are a Non-Resident (NRI) for that year. Resident but Not Ordinarily Resident (RNOR) is a transitional status for 2-3 years on return — foreign income is generally not taxable during this period.

OCI (Overseas Citizen of India): not Indian citizenship, but a lifelong visa and near-parity with NRIs for property, investment, and banking rights. OCIs cannot own agricultural land or hold government employment. The PIO (Person of Indian Origin) card was merged into OCI in 2015 — all PIO cards became OCI cards.

Practical consequence: you may simultaneously be an NRI under FEMA (from day one of moving abroad) but a Resident under the Income Tax Act (if you spent 182+ days in India that year). Both status determinations must be done separately for each statute.

The single most common — and most costly — NRI banking mistake is using the wrong account for the wrong type of money. FEMA requires strict separation of foreign-source and Indian-source funds.

NRE (Non-Resident External) account: for foreign earnings remitted to India. Interest is fully tax-free in India. Principal and interest are fully repatriable. Cannot receive Indian-source income — depositing rent from an Indian property into an NRE account is a FEMA violation.

NRO (Non-Resident Ordinary) account: for Indian-source income — rent, dividends, pension, sale proceeds of Indian assets. Interest taxed at 30% TDS (reducible under DTAA). Repatriable up to USD 1 million per financial year with Form 15CA/CB documentation.

FCNR (Foreign Currency Non-Resident) account: fixed deposit in foreign currency (USD, GBP, EUR etc.). Tax-free, fully repatriable, hedges against rupee depreciation. Fixed tenure 1-5 years.

Most NRIs need both NRE and NRO accounts. On return to India (becoming Resident), both must be redesignated within a reasonable time — continuing to operate them as NRE after becoming Resident is a FEMA violation. The transition vehicle is an RFC (Resident Foreign Currency) account, which allows you to keep foreign currency without immediate conversion.

As an NRI (non-resident under the Income Tax Act), only your Indian-source income is taxable in India — foreign income is not. Indian-source income includes: rental income from Indian property; dividends from Indian companies; interest on NRO accounts (30% TDS); capital gains from sale of Indian assets (shares, property, mutual funds); salary for services rendered in India.

TDS and refunds: Indian payers deduct TDS at flat rates on NRI income — 30% on NRO interest, 20% on dividends (before DTAA), and specific rates on capital gains. If your actual Indian tax liability is lower (after deductions), file an ITR to claim a refund. Form 26AS/AIS shows all TDS deducted.

Double Tax Avoidance Agreements (DTAAs): India has 90+ DTAAs that can reduce TDS rates on NRO interest (typically to 10-15%), dividends, and capital gains. To claim DTAA benefits, submit a Tax Residency Certificate (TRC) from your country of residence and Form 10F to your Indian bank before the financial year begins.

Filing requirements: NRIs with Indian income above the basic exemption limit (₹2.5 lakh) must file ITR-2 (or ITR-3 for business income) by 31 July. Disclose foreign assets in Schedule FA. The Black Money (Undisclosed Foreign Income and Assets) Act, 2015 carries severe penalties — up to 120% of tax plus 10 years' imprisonment — for non-disclosure by residents (not NRIs, but relevant on return).

FEMA generally permits NRIs and OCIs to purchase residential and commercial property in India freely — no RBI approval is needed, and there is no limit on the number of properties. However, three categories of land are prohibited: agricultural land, farmhouses, and plantation property. These can only be acquired by NRIs through inheritance or as a gift from a resident Indian.

Funding the purchase: the purchase price must be paid through normal banking channels — inward remittance from abroad, or funds held in NRE/NRO/FCNR accounts. Payment in foreign currency from outside India is not required; rupee payment from NRE or NRO accounts is acceptable. Cash payment (above ₹2 lakh) violates the Income Tax Act.

Home loans: available to NRIs from Indian banks and HFCs, repayable from NRE/NRO accounts or inward remittances. LTV ratios and interest rates are broadly similar to resident Indian loans. Documents required include employment proof, overseas address proof, salary slips or business financials, and NRI banking statements.

Repatriation of sale proceeds: sale proceeds of residential or commercial property purchased from foreign remittances can be repatriated up to the original purchase amount (in foreign currency) or two properties' worth over a lifetime. Amounts above this, and proceeds from property inherited or received as gift, go through the NRO repatriation route (USD 1 million per year with Form 15CA/CB).

Capital gains tax: long-term capital gains (property held 24+ months) taxed at 12.5% without indexation benefit (from FY 2024-25 budget changes). Short-term gains at slab rate. TDS at 12.5%-20% is deducted by the buyer on NRI sellers — apply for a lower TDS certificate from the Income Tax Officer if your actual liability is less.

FEMA 1999 and the rules and regulations framed under it govern every cross-border financial transaction for NRIs. The compliance obligations are not onerous but the penalties for violations — up to 3x the amount involved — make it worth being systematic.

On becoming NRI: convert your existing resident savings/current accounts to NRO accounts (or close them). Inform your bank of your change in residential status. Existing PPF accounts continue to maturity but no new PPF accounts can be opened after becoming NRI. Existing investments in shares, mutual funds and fixed deposits are 'deemed NRO' and can be continued.

Equity investments: secondary market purchases of Indian shares require a PIS (Portfolio Investment Scheme) account — a designated NRE or NRO account through which all stock exchange purchases must route. IPO applications, mutual fund investments, and NPS contributions can be made without PIS. The PIS permission is account-specific; having NRE/NRO accounts at a bank does not automatically give PIS — apply separately.

Prohibited investments for NRIs: new PPF accounts; small savings schemes (NSC, SCSS, Sukanya Samriddhi); section 10(15)(i) bonds (post office MIS); and agricultural land. OCI holders face the same restrictions.

Outward remittance: NRIs are not covered by the Liberalised Remittance Scheme (LRS), which is for resident Indians. NRI outward remittances from NRE accounts face no limit; NRO repatriation is capped at USD 1 million per FY with documentation.

An NRI who owns Indian assets — property, bank accounts, shares, fixed deposits — without an Indian will is leaving their succession to chance. Indian succession law (Hindu Succession Act, Indian Succession Act, Muslim Personal Law) will apply to Indian assets on death, and the result may not match the NRI's intentions or their foreign will.

Why a separate Indian will? A foreign will (UK, US, Australian etc.) is theoretically admissible in Indian courts but requires probate in the foreign country followed by re-sealing in India — a process that takes years and costs money. A locally executed Indian will, registered in India, can be probated in India directly. The two wills coexist: one covers Indian assets, one covers foreign assets.

Formal requirements: an Indian will must be in writing, signed by the testator in the presence of two witnesses, who also sign. No stamp duty. Registration is not mandatory but strongly recommended — a registered will is harder to contest and avoids probate in some states. Probate is mandatory in Bombay, Calcutta and Madras High Court jurisdictions for movable property; elsewhere it is optional.

What to cover: Indian residential and commercial property (with full survey/flat details); NRE, NRO, and FCNR accounts (with account numbers and bank names); Indian shares and mutual funds (with demat account details); PPF and insurance policies; jewellery held in India. Appoint an executor who is a Resident Indian — makes probate and execution far easier.

Power of Attorney: while in India, execute a specific POA to a trusted person to manage property, file ITRs, sign documents, and deal with banks. A general POA is risky; a specific, registered POA for defined tasks is preferable. POAs executed abroad must be apostilled (Hague Convention countries) or attested at the Indian consulate.

OCI card: available to foreign nationals of Indian origin (who held Indian citizenship or one of whose parents/grandparents held Indian citizenship at any point). Application is through the Indian Mission abroad. Processing takes 3-6 months. OCI gives: lifelong visa, parity with NRIs for property and investment rights, no reporting to Foreigners Regional Registration Office (FRRO) for extended stays. OCI holders cannot vote, hold constitutional offices, government employment, or own agricultural land.

Aadhaar for NRIs: NRIs who hold valid Indian passports can apply for Aadhaar after residing in India for 12 months in the preceding 3 years (the 182-day rule was amended — check current UIDAI guidelines). Aadhaar is required for PAN-Aadhaar linking, filing ITR, claiming DTAA benefits via Form 10F online, and various banking formalities. OCI holders are not eligible for Aadhaar unless they also hold Indian citizenship.

PAN card: mandatory for NRIs with Indian income, for opening NRO accounts, and for property transactions above ₹50 lakh. Apply online through NSDL or UTIITSL with apostilled documents. PAN is linked to Aadhaar for Indian citizens — OCI holders link PAN to their passport instead.

Passport renewal: Indian passports of NRIs are renewed at Indian Missions abroad. Tatkal is available in some missions. A valid Indian passport is the primary identity document for all Indian financial and legal transactions.

When an NRI returns to India permanently, the transition from NRI to Resident status has significant financial and compliance implications that are best managed proactively.

RNOR period: on return, most NRIs qualify for Resident but Not Ordinarily Resident (RNOR) status for 2-3 years — a transitional status where foreign income (other than from an Indian business or profession) is not taxable in India. This is the ideal window for repatriating foreign assets to India, since the money is not taxable as Indian income during RNOR. After RNOR ends, worldwide income becomes taxable in India.

Account conversions on return: NRE and FCNR accounts must be converted to resident accounts or RFC (Resident Foreign Currency) accounts within a reasonable time of becoming Resident. RFC accounts let you hold foreign currency tax-free during the RNOR period — a valuable tool for those with substantial foreign currency savings. NRO accounts can continue as resident accounts.

Investment portfolio on return: PIS-linked NRI demat accounts convert to regular resident demat accounts. Direct equity without PIS restrictions, full PPF access, SCSS, and post office instruments become available. Review the portfolio for tax-efficiency before the RNOR period ends.

Foreign asset disclosure: residents (including RNOR) must disclose foreign assets in Schedule FA of their ITR. This includes bank accounts, property, investments, and beneficial interests held abroad. Non-disclosure after becoming Resident is a Black Money Act violation — the consequences are severe. Use the RNOR period to wind down or disclose all foreign assets in an orderly way.