Non-Resident Indians must ensure proper compliance with Indian tax and regulatory requirements. The following key checks help maintain transparency, avoid penalties, and safeguard financial interests in India.
1) Confirm Residential Status Every Financial Year
Residential status forms the basis of taxability in India. It is determined by the number of days stayed in India during the financial year along with prescribed conditions under tax laws.
A change in status—from Non-Resident to Resident or RNOR—can significantly impact tax liability and foreign asset reporting. Therefore, residential status should be reviewed annually rather than assumed.
2) Update Income Tax E-Filing Account
Regularly reviewing the income tax e-filing account is essential.
Key aspects to verify:
- Ensure PAN is active and operative (check via Form 26AS or portal alerts)
- Link PAN with Aadhaar, if applicable
- Update profile details such as residential status, passport information, contact details, and address
Accurate records ensure proper communication and reflect correct NRI status.
3) Use Appropriate Bank Accounts – NRE, NRO, FCNR
Maintaining correct bank accounts is a critical FEMA requirement.
- Resident savings accounts must be redesignated upon becoming an NRI
- Continue transactions only through NRE, NRO, or FCNR accounts
- Avoid using resident accounts post status change
- Maintain documentation of communication with banks regarding conversion
Income tax filings now require disclosure of account types, indicating increased scrutiny.
4) Disclose NRI Status Across Transactions
It is important to inform banks, tenants, buyers, and financial institutions about NRI status.
Correct disclosure ensures:
- Proper TDS deduction
- Compliance with applicable regulations
- Avoidance of errors by counterparties that may lead to future complications
5) File Income Tax Return in India
Filing an Income Tax Return is advisable even where:
- Income is minimal
- TDS has already been deducted
- Transactions are limited
Regular filing helps establish compliance history and ensures accurate reporting of financial activities in India.
6) Restrictions on Purchase of Agricultural Property
Under FEMA regulations, NRIs are not permitted to purchase:
- Agricultural land
- Plantation property
- Farmhouses
Such properties may only be acquired through inheritance. Attempting indirect acquisitions through relatives or structured arrangements may lead to serious legal and tax consequences.
7) Avoid Informal Financial Transfers
Financial systems in India are increasingly monitored and PAN-linked.
NRIs should avoid:
- Cash transactions
- Unofficial transfers
- Third-party routing
- Undocumented gifts or loans
All transactions should be properly recorded with:
- Clear documentation (gift deeds or loan agreements)
- Defined purpose and relationship
- Transparent banking trail
8) Review Past Notices and Compliance Records
Periodic review of the income tax portal is essential.
Areas to check:
- Pending actions and worklist
- E-proceedings
- Outstanding demands
- AIS and compliance portal feedback
- Previously filed returns
Timely resolution of pending issues prevents escalation.
9) Safeguard Indian Assets
Asset protection is a critical aspect of financial planning.
NRIs should ensure:
- Updated nominations in bank, demat, and investment accounts
- Clear property ownership records
- A properly drafted Will with defined beneficiaries and executor
It is important to note that a nominee acts only as a custodian and not the final beneficiary. Legal heirs ultimately inherit assets as per succession laws or a valid Will.
Conclusion
India presents significant opportunities for NRIs in terms of investments, property ownership, and wealth creation. However, these opportunities come with regulatory responsibilities.
Maintaining compliance, ensuring proper documentation, and following legal procedures are essential to avoid complications and protect long-term financial interests.
If you have any further questions or need assistance, feel free to reach out to us at admin@ushmaassociates.com or info@nricaservices.com, or contact us via call/WhatsApp at +91 9910075924.
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Disclaimer: Aim of this article is to give basic knowledge about the topic to people who are not in touch with Indian tax norms. When anybody is dealing with these kinds of cases practically, he shall consider all relevant provisions of all applicable Laws like FEMA/Income Tax/RBI /Companies Act etc
