Every year, thousands of NRIs make the journey home. Some after decades abroad. Some with careful planning. Many without.
I've helped hundreds of families navigate this transition over the past 12 years. The patterns I see are remarkably consistent. Smart, successful professionals who built wealth abroad make avoidable mistakes that cost them lakhs-sometimes crores-in penalties, taxes, and missed opportunities.
Here are 25 mistakes I've seen repeatedly, along with exactly how to avoid each one.
Banking and Account Mistakes
1. Not Converting NRE/NRO Accounts Immediately
The mistake: Continuing to operate NRE/NRO accounts after becoming a resident, sometimes for years.
Why it hurts: Under FEMA guidelines, you must convert NRE accounts to resident accounts or RFC accounts once your status changes. Penalties can reach three times the account balance or ₹2 lakhs, plus ₹5,000 per day of non-compliance.
The fix: Contact all your banks within 30 days of returning. Submit conversion forms immediately. Don't wait for the bank to ask.
👉 Tip: Convert NRE accounts to RFC (Resident Foreign Currency) accounts if you want to maintain foreign currency exposure and continue earning tax-free interest during your RNOR period.
2. Not Informing Banks About Status Change
The mistake: Assuming banks will automatically know when you've returned.
Why it hurts: Banks don't track your passport movements. You're responsible for declaring status changes. One client was charged penalty fees for three months because he delayed informing his bank.
The fix: Create a list of every financial institution where you hold accounts-banks, brokerages, mutual fund houses, insurance companies. Notify each one systematically.
3. Letting FCNR Deposits Continue Without Understanding Tax Implications
The mistake: Assuming FCNR interest remains tax-free after returning.
Why it hurts: FCNR interest is tax-free only while you're an NRI. Once you become ROR (Resident and Ordinarily Resident), interest earned becomes taxable-even if the deposit was created when you were abroad.
The fix: Existing FCNR deposits can continue until maturity, but factor in the tax implications. Consider converting maturing FCNR deposits to RFC accounts if you're still RNOR.
4. Not Opening RFC Account
The mistake: Converting all foreign currency holdings to rupees immediately.
Why it hurts: You lose currency diversification protection. If the rupee depreciates (which it has consistently done against major currencies), your purchasing power drops.
The fix: Open an RFC account to park foreign currency earnings. Interest remains tax-free during RNOR period. You can repatriate funds freely later if you decide to move abroad again.
Tax Planning Mistakes
5. Not Understanding RNOR Status
The mistake: Assuming foreign income becomes immediately taxable upon return.
Why it hurts: You miss a 2-3 year window where foreign income remains exempt from Indian taxation. This can mean lakhs in unnecessary taxes.
The fix: Check if you qualify for RNOR status. You qualify if you were an NRI in 9 out of the 10 preceding financial years OR stayed in India for 729 days or less in the preceding 7 years. Use Belong's Residential Status Calculator before each tax filing.
6. Withdrawing 401k at the Wrong Time
The mistake: Cashing out your 401(k) before returning, or withdrawing without understanding cross-border tax implications.
Why it hurts: Early withdrawal before age 59½ attracts a 10% penalty plus 30% withholding tax in the US. Double taxation is possible without proper planning.
The fix: Consider leaving the 401(k) untouched until 59½, rolling over to an IRA, or timing withdrawals during RNOR years when foreign income isn't taxed in India. File Form 67 to claim foreign tax credits when filing Indian ITR.
👉 Tip: Section 89A introduced in Budget 2021 allows deferral of Indian tax on foreign retirement accounts. Consult a cross-border tax specialist before making any withdrawal decisions.
7. Not Filing Form 67 for Foreign Tax Credit
The mistake: Paying taxes in both countries without claiming relief.
Why it hurts: India has DTAA agreements with over 90 countries. You can claim credit for taxes paid abroad, but only if you file Form 67 before or along with your ITR.
The fix: Keep records of all foreign tax payments. File Form 67 when submitting your Indian tax return.
8. Misunderstanding When Global Income Becomes Taxable
The mistake: Thinking "RNOR means my foreign income is never taxed."
Why it hurts: RNOR is temporary-typically 2-3 years. Once you become ROR, your worldwide income becomes taxable in India. Many people are caught off guard.
The fix: Plan ahead. If you're going to sell foreign assets anyway, do it during your RNOR years. Time your 401(k) withdrawals strategically. Don't wait until you're ROR and fully exposed.
9. Not Reporting Foreign Assets
The mistake: Failing to disclose foreign bank accounts, investments, and assets in your ITR.
Why it hurts: Under the Black Money Act, non-disclosure of foreign assets can attract penalties up to ₹10 lakhs and even imprisonment. FATCA and CRS mean tax authorities share information globally.
The fix: Disclose all foreign assets in Schedule FA of your ITR. This includes bank accounts, investment accounts, properties, and any other overseas assets.
10. Timing Return Poorly
The mistake: Returning to India in January, losing almost an entire financial year of RNOR benefits.
Why it hurts: If you return in January and stay more than 182 days that year, you become resident immediately. Your RNOR window shrinks significantly.
The fix: Return between July-September to maximize RNOR duration. You'll get nearly 3 full financial years of tax benefits on foreign income.
Investment Mistakes
11. Not Updating Investment Status
The mistake: Keeping mutual funds, stocks, and demat accounts in NRI mode after becoming resident.
Why it hurts: Your PIS account must be closed. Mutual fund houses need to be informed. Non-compliance creates regulatory issues and may affect redemption.
The fix: Inform all mutual fund houses and brokerages about your status change. Close your PIS account and open a regular demat account.
12. Selling Foreign Assets at the Wrong Time
The mistake: Holding onto US stocks or foreign investments until you become ROR, then selling.
Why it hurts: Capital gains from foreign assets are taxable in India once you're ROR. During RNOR, such gains from foreign assets aren't taxed.
The fix: If you plan to sell foreign investments eventually, consider doing so during your RNOR period when capital gains aren't taxable in India.
13. Over-Investing in Real Estate
The mistake: Buying multiple properties in India while living abroad, or rushing to buy immediately upon return.
Why it hurts: Rental yields in India average 2-4%-often below inflation. Properties are illiquid, require management, and generate tax complications. Many NRIs own properties sitting vacant for years.
The fix: Think critically about real estate. If you need a home to live in, buy one. But don't treat property as your primary investment vehicle. Consider GIFT City investments or mutual funds for wealth-building.
14. Not Understanding New Capital Gains Tax Rules
The mistake: Assuming the old 20% with indexation rule still applies to property sales.
Why it hurts: From July 23, 2024, long-term capital gains on property are taxed at 12.5% without indexation. For properties bought before this date, you can choose between old and new rules-but you need to calculate which is better.
The fix: Before selling any property, calculate your tax liability under both old (20% with indexation) and new (12.5% without indexation) regimes. Choose strategically.
15. Missing Section 54/54F Exemptions
The mistake: Selling property and paying full capital gains tax without exploring exemptions.
Why it hurts: You could have reinvested in another residential property (Section 54) or capital gains bonds (Section 54EC) and saved lakhs in taxes.
The fix: Plan property sales in advance. If you want to reinvest, you have 2 years to buy or 3 years to construct a new property. For bonds, you have 6 months and can invest up to ₹50 lakhs.
Exemption | Applicable To | Reinvestment Timeline | Limit |
|---|---|---|---|
Section 54 | Residential property sale | 2 years to buy / 3 years to construct | ₹10 crore (AY 2024-25 onwards) |
Section 54EC | Any long-term capital asset | 6 months | ₹50 lakhs |
Section 54F | Sale of non-residential asset | 2 years to buy / 3 years to construct | Entire net consideration |
Insurance Mistakes
16. Not Buying Health Insurance Before Returning
The mistake: Waiting until after landing in India to purchase health insurance.
Why it hurts: Most Indian health insurance policies have waiting periods of 2-4 years for pre-existing conditions. If you buy after returning, you're uninsured for those conditions until the waiting period ends.
The fix: Buy Indian health insurance 3-4 years before you plan to return. By the time you move, waiting periods are complete. You can raise claims immediately.
👉 Tip: NRIs below 60 can claim tax deduction of up to ₹50,000 under Section 80D for health insurance premiums. You may also be eligible for 18% GST refund if you pay from an NRE account.
17. Assuming International Insurance Covers India
The mistake: Relying on your UAE or US health insurance for medical expenses in India.
Why it hurts: Most international policies don't cover planned or elective procedures in India. Some treat India as a non-network region requiring advance approvals. Your company insurance ends the day you resign.
The fix: Maintain separate Indian health insurance. Don't cancel international coverage immediately-overlap for 2-3 months while testing your new Indian policy.
18. Not Understanding Waiting Periods
The mistake: Buying health insurance upon return and immediately trying to claim for a pre-existing condition.
Why it hurts: Claims get rejected. You end up paying out of pocket for conditions you thought were covered.
The fix: Understand that waiting periods apply: typically 30 days initial waiting, 1-2 years for specific diseases, and 2-4 years for pre-existing conditions. Plan accordingly.
Documentation and Compliance Mistakes
19. Not Maintaining Proper Return Documentation
The mistake: Not keeping records of when you returned, flight tickets, or proof of intent to stay.
Why it hurts: Creates problems during tax assessments or RBI queries. Your residential status could be disputed.
The fix: Maintain a file with your return flight ticket, proof of address change, job offer letter (if applicable), and any other documentation showing your intent to settle in India.
20. Not Getting Lower TDS Certificate When Selling Property
The mistake: Allowing the buyer to deduct full TDS (20-30% on entire sale value) when selling property.
Why it hurts: TDS for NRIs is deducted on the entire sale consideration, not just capital gains. You may have huge amounts blocked with the tax department until you file returns and claim refund.
The fix: Apply for a Lower Deduction Certificate (Form 13) from the Assessing Officer before the sale. TDS will then be deducted only on actual capital gains.
21. Not Filing Form 15CA/15CB for Repatriation
The mistake: Trying to repatriate funds without proper documentation.
Why it hurts: Banks won't process the transfer. Funds get stuck. You may face compliance queries.
The fix: Understand Form 15CA and 15CB requirements. 15CA is a declaration you file online. 15CB is a certificate from a Chartered Accountant required for payments above certain thresholds.
Lifestyle and Planning Mistakes
22. Not Planning for Cost of Living Differences
The mistake: Assuming Dubai or US savings will stretch indefinitely in India.
Why it hurts: While many things are cheaper, healthcare costs are rising rapidly. Private schooling costs comparable to international fees. Lifestyle inflation catches up faster than expected.
The fix: Create a realistic budget based on actual Indian costs for your desired lifestyle. Factor in healthcare inflation (10-15% annually), education costs, and domestic help expenses.
23. Not Rebuilding Credit Score
The mistake: Assuming your excellent US or UAE credit history transfers to India.
Why it hurts: Your credit history doesn't travel internationally. Banks treat you as someone with no credit history. Loan applications get rejected or attract higher interest rates.
The fix: Check your CIBIL score immediately after return. If you have old defaults, settle them. Start rebuilding with a secured credit card against FD. Keep credit utilization below 30%.
24. Not Updating Will and Estate Plans
The mistake: Keeping a foreign will that doesn't properly cover Indian assets, or having no estate plan at all.
Why it hurts: Assets get stuck in probate. Family members face legal complications. Double taxation of inheritance across countries.
The fix: Create separate wills for Indian and foreign assets. Consult a lawyer who understands cross-border estate planning. Update nominee details on all Indian accounts and investments.
25. Making Decisions Based on Emotions, Not Numbers
The mistake: Buying property in your hometown for emotional reasons. Investing in a friend's business without due diligence. Rushing major financial decisions because "you're finally home."
Why it hurts: Emotional decisions rarely align with financial logic. That ancestral property may be a money pit. That business opportunity may be poorly structured.
The fix: Take your time. Use the first year to understand the financial landscape. Don't commit to major investments until you've settled in and evaluated options objectively.
Your Action Plan
Moving back to India is one of the most significant financial transitions you'll make. The difference between a smooth return and a costly one often comes down to preparation.
In the next 30 days: Contact all banks and convert NRE/NRO accounts. Notify all investment platforms about status change. Check your RNOR eligibility.
Before your first ITR filing: Gather foreign tax payment records. File Form 67 if claiming DTAA benefits. Disclose all foreign assets in Schedule FA.
Use Belong's Compliance Compass to check if you're following all necessary rules across banking, investments, and taxation.
Have questions? Join our NRI WhatsApp Community where thousands of returning NRIs share experiences and help each other navigate these challenges. Or download the Belong app to explore GIFT City investment options that remain tax-efficient even after you return.
Sources:
- Foreign Exchange Management Act (FEMA), 1999
- Income Tax Act, 1961 – Sections 6, 54, 54EC, 54F, 89A
- RBI Master Circulars on NRI Accounts
- Finance Bill 2024 – Capital Gains Tax Changes
- National Housing Bank Guidelines
- IRDAI Health Insurance Regulations
