A Tax & Investment Guide for NRIs Returning to India with US Investments

Introduction

Many NRIs return to India after years of working in the US with a meaningful portion of their wealth invested in US stocks, ETFs, and brokerage accounts. While returning home simplifies life in many ways, it adds complexity to taxation, compliance, and investment decisions.

What worked when you were a US tax resident may no longer be optimal once you become an Indian tax resident again.

This guide explains how US investments are taxed after returning to India, what changes in your tax status, and how to think about your portfolio during this transition.

Step One: Understand Your Tax Status After Return

Once you qualify as a tax resident of India, India begins taxing you on your worldwide income, including US investments.

At the same time, the US generally treats you as a Non-Resident Alien (NRA) unless you continue to meet US residency tests.

This shift changes how:

• Capital gains are taxed

• Dividends are withheld

• Compliance and reporting work

• Estate risk applies

US Taxation After You Return to India

Capital Gains on US Stocks

For most NRIs returning to India:

• The US does not tax capital gains on US stocks

• This applies to both short-term and long-term gains

US capital gains tax applies only if:

• You are physically present in the US for 183 days or more in that year, and

• The gains are not protected under treaty rules

For most returning NRIs, capital gains are taxable only in India.

Dividends from US Stocks

Dividends continue to be taxed in the US.

• Default withholding: 30%

• India–US DTAA rate: 25%

Ensure Form W-8BEN is updated with your broker after returning to India to avoid excess withholding.

The US tax withheld can be claimed as Foreign Tax Credit (FTC) in India.

Indian Taxation Once You Are Back

As an Indian tax resident, all foreign income becomes taxable in India.

Capital Gains (Current Law)

US stocks are treated as foreign (unlisted) equity shares.

• Long-term (held > 24 months): 12.5% flat tax

• Short-term (≤ 24 months): Taxed at slab rates

This often surprises returning NRIs who expect US-style capital gains rules to apply.

Dividends & Interest

• Added to your total income

• Taxed at slab rates (up to 30% + surcharge + cess)

• FTC can be claimed for US taxes already withheld

Avoiding Double Taxation During Transition

The India–US DTAA ensures:

• Capital gains are taxed only in India

• Dividends are taxed in both countries, but credit avoids double taxation

To claim FTC, Form 67 must be filed before your Indian ITR.

Missing this step is one of the most common (and costly) mistakes returning NRIs make.

Compliance Checklist After Returning to India

US Side

• Maintain a valid Form W-8BEN

• Confirm your broker classifies you as a non-resident correctly

India Side

• Schedule FA: Declare all US assets

• Schedule FSI: Report foreign income

• Form 67: Claim foreign tax credit

• Track exchange rates for accurate reporting

The Cash Flow Reality: TCS & Banking Costs

TCS on Remittances

• 20% TCS applies only on remittances above ₹10 lakh per financial year

• Applies across all LRS transactions combined

• Fully adjustable or refundable when filing your return
  
  

Bank & FX Charges (Often Ignored)

Returning NRIs often underestimate:

• FX conversion margins (1–3%)

• Outward remittance fees

• Correspondent bank deductions

• Charges on dividend and sale proceeds credited to India

Over time, these frictional costs can reduce returns more than visible taxes.

The US Estate Tax Exposure Still Exists

Returning to India does not eliminate US estate tax risk.

For non-resident aliens:

• Exemption: $60,000

• Tax rates: 18%–40%

• Applies to US stocks, ETFs, and real estate

The India–US treaty offers limited relief.

If your US investments exceed $60,000, estate planning should be part of your transition plan.

A Thoughtful Portfolio Question Returning NRIs Should Ask

After returning to India, many NRIs reach an inflection point:

Should my long-term wealth still sit largely in the US, or should it gradually align with India — where I live, earn, and spend?

There is no one-size-fits-all answer. But what’s clear is that:

• Tax rules change

• Compliance complexity increases

• Estate risks become real

• Banking friction grows over time

Re-evaluating your asset allocation is not about exiting the US market —
It's about aligning your wealth with your life stage.

Where Pivot Money Fits In

At Pivot Money, we work closely with NRIs and returning residents to simplify Indian investing while keeping global context in mind.

Our focus today is helping NRIs:

• Invest in India efficiently and compliantly

• Avoid unnecessary fees and paperwork

• Structure investments for long-term clarity

As cross-border wealth becomes more common, our goal is to act as a single platform and advisor that understands both sides of the equation — US and India — so your money works cohesively, not in silos.

Final Thought

Returning to India is not just a change in address — it’s a reset of your financial framework. The earlier you align your investments with your new tax reality, the more control you retain over returns, risk, and complexity.

Thoughtful planning today prevents forced decisions tomorrow.