ED suspects FEMA violations, seeks details of fund source, assets

The Enforcement Directorate (ED) has served notices on at least a dozen non-resident Indians (NRIs) in the past two weeks, seeking information on the source of funds and foreign assets. The federal agency is on a drive to verify if any provision in the foreign exchange law has been flouted.
 
The ED sought information under Section 37 of the Foreign Exchange Management Act (FEMA), which is typically invoked to obtain primary details for initiating a probe.
 
Sources say some NRIs are also being probed under the Black Money Act by the income-tax department after their names featured in some global leaks.
 
The recipients of these notices — some served as far back as July — are mostly based in Mumbai.
 
The federal agency has also sought proof of government identity and tax filing, bank account records, details of foreign entities, those associated with moveable and immoveable properties - in India and abroad - where the person concerned is the authorised signatory. They have been directed to furnish information of their antecedents of the past decade, said a source.
 
The move has come at a time when several NRIs are seeking clarity of their residency status, especially those from tax-neutral countries like Dubai, Saudi Arabia, Kuwait, and other Gulf nations who had to extend their stay due to the second wave of the pandemic.

According to the FEMA Act, an individual is considered a ‘resident’ in India if he is present for 182 days or more in the last financial year. However, there are certain factors which do not apply. For instance, this provision won't apply if individuals migrate for employment. The rationale behind the stay determines the residency status vis-à-vis I-T implications.
 
However, the government had clarified in March that those who have been taxed twice can seek redress from the tax department. But for tax-neutral countries, he will have to pay taxes on his global income since he becomes a Resident and Ordinarily Resident in case of overstay.
 
These notices have, however, not clarified whether the information being sought is solely for residency status.
 
However, a source indicated there have been instances in the past when several evaded taxes on offshore earnings by falsely declaring themselves as NRIs. They were probed for failing to prove their NRI status.
 
So far, the government has filed 107 prosecution complaints — or charge sheets — under the new Black Money Act and detected undisclosed income of about Rs 20,078 crore in the Panama Papers leak case.