Indian Compliance Laws: What Every NRI Needs to Know?

Many non-resident Indians have been receiving letters from the Income Tax Department for non-compliance, and many of them are having difficulties with investments that they used to make in India with ease. Several NRIs have been unable to make investments in Indian mutual funds because of regulatory disabling of their accounts.

These examples demonstrate the importance of knowing the challenges of financial management in India. As Non-Resident Indians, keeping updated and complying with Indian financial and legal requirements is more important than ever. Failure to follow these guidelines might result in serious legal and financial consequences.

To assist you in exploring the intricacies of Indian compliance laws, we examine the various facets of guaranteeing compliance in this blog. We also look at how you could stay compliant and avoid costly fees. Also if you are planning to visit India to handle your financial matters personally, booking cheap flights to India from Canada via Tripbeam can make your travel more affordable.

Changing bank accounts: Your regular savings are no longer applicable

According to FEMA regulations, non-resident Indians cannot hold regular Indian savings accounts. These regulations mandate that NRIs convert their regular savings accounts into Non-Resident Ordinary or Non-Resident External accounts.

Failure to comply with this can result in serious financial penalties, including fines of up to three times the account amount, or ₹2 lakhs if indeterminate, with a daily fine of ₹5,000 until resolved.

Income tax compliance: Make sure you file on time.

Earning through fixed deposits or property in India requires you to file tax returns in India that reflect your NRI status.

Not disclosing NRI status or neglecting tax return filings can lead to significant consequences.

Furthermore, failing to take advantage of Double Taxation Avoidance Agreements (DTAA) might result in avoidable financial losses from twice taxation on the same income.

Investing rules: Handling complexities

If you use a resident savings account to invest in Indian markets, you risk receiving significant penalties from the Income Tax Department, including permanent prohibition from future investments.

To invest lawfully, NRIs must use Non-Resident Ordinary (NRO) or Non-Resident External (NRE) accounts, as Asset Management Companies (AMCs) in India do not accept foreign currency investments. Every NRI investment must be done in Indian rupees.

Failure to comply could incur consequences beyond financial penalties

Ignoring these rules is not a trivial blunder; it can result in substantial financial penalties under the Foreign Exchange Management Act (FEMA). The consequences include large fines that not only destroy your finances but also cause a lot of worry and potential legal issues.

To Sum Up:

Managing various responsibilities across borders can be difficult, but ignoring your legal obligations in India is a risky proposition. With huge fines and legal issues at stake, it is critical to prioritize compliance. Tools like Vance’s risk compliance and risk checker aren’t simply useful; they’re necessary. Remember, it is preferable to be proactive with compliance rather than reactive to penalties.

Also Read: What is Overseas Citizenship of India: Eligibility Criteria and More