Several NRIs asked to reveal their source of funds

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A number of Non­ Resident Indians (NRIs) have been asked to provide source of income for the money parked and transferred in their NRE bank accounts.

India’s Enforcement Directorate (ED), which probes irregular foreign currency transactions and money laundering, has sent notices to several NRIs for parking funds in NRE (Non Resident External) bank accounts and buying properties.

Over the past two months, many of them have been asked to meet officials of ED and explain their source of fund, a report on Economic Times said.

Genuine or tax evasion?

What is of concern to the Enforcement Directorate is whether the source of income is genuine or is it a tax evasion technique adopted by resident businessmen or politicians.

While most fund transfers are genuine, there are instances where money moved in a circuitous route to evade tax.

Are NRIs responsible to answer?

Even though NRIs do not have to pay tax for their earnings or funds abroad, none of them can afford to disregard the notices as long as they continue to hold Indian passport.

If someone cannot explain the source of fund, it would not only be a violation of the Foreign Exchange Management Act but also expose the person to tax demands and penalty.

As a citizen of India (though not a resident Indian from tax or FEMA perspective), an individual is obliged to respond to any question raised by any regulatory authority be it tax, FEMA, ROC, etc.

However, such individuals are not obliged to provide specific details about the transaction which are entered outside India as a Non Resident.

Related : Understanding Types of NRI Bank Accounts

Even if a person’s earnings saved in an NRE account are legitimate and deposited while he was an NRI, such individuals may be pulled up if they had continued with the accounts after returning to India.

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It’s happening at a point when Dubai is losing some of its charm as a destination to park unaccounted money and many are in search of tax havens which are outside New Delhi’s sphere of influence, the report added.

Since early 2016, all remittances to and from entities in UAE Free Trade Zone is being questioned by the banks for their genuineness, experts say.

3 Comments

  1. Just i was on vacation and due to some reason I was in the SBI bank to update my passbook with branch manager ‘ he ask me to show proof that you are staying abroad’ I showed him residency permit ID card ‘ he said it’s in Arabic we want in English and this ID does not show proof that you are staying in particular country as sponsor name is written in Arabic ‘ in this case what shall we do ‘ I request to the Indian embassy to issue such certificate those who approach or ask for issue of such residency proof certificates . Or please some one legal advisor or legal council can explain or advise on such serious issues.

    • If you have any recent electricity bill you paid and if the connection is on your name – you can show the same to the bank manager. It is always good to keep two ID’s as proof for your residence. (The electricity bill or your foreign bank account should have your ID number printed on it). This should be more than enough.

  2. Aravindan selvaraj on

    Either Your salary account statement or your visa page is suffice and answer all their queries.
    The bank statement should be stamped and signed from the bank.

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