NRI Income Tax & Compliance

Foreign Exchange Management Act, 1999 - FEMA

By Ritesh Jain |Last Updated: December 4, 2025

Foreign Exchange Management Act, 1999 - FEMA

Frequently Asked Questions

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With respect to the Internal Revenue Service, Form 8621 is used by U.S. taxpayers to report their shares in passive foreign investment companies.

The PFIC tax is a highly disciplinary US tax regime applied to investments made in Passive Foreign Investment Companies, such as foreign-based mutual funds or FTFs.

As high as 40%.

If you hold shares of PFIC, you may not have to file Form 8621 with the IRS each year for each PFIC investment.

By now, there is no such direct monetary penalty associated with failing to file for 8621.

FEMA is India's framework for managing foreign exchange transactions (like remittances, investment, and property purchases), and an NRI must adhere to the rules when transferring money or investing across borders.

No, once you get an NRI status, you need to switch to an NRE, NRO, or FCNR account. Holding a regular savings account is not permitted.

LRS applies only to resident Indians; NRIs are not eligible under this scheme. NRIs are required to follow FEMA guidelines for remittance and repatriation.

Yes, NRIs can invest in Indian assets, subject to capital account regulations, provided they use permitted accounts and adhere to RBI norms.

Yes, NRIs can invest in residential or commercial property. However, they must use NRE/NRO accounts for making the transactions and comply with repatriation limits, which is USD 1 million per year.

Violations are civil offenses, not criminal, but may incur penalties up to three times the violation amount and daily continuing fees.

The RBI regulates transactions and issues rules, while the Enforcement Directorate (ED) handles violations and penalties.

Yes, NRIs holding foreign assets, or receiving FDI or ECBs, must file periodic returns like Foreign Liabilities and assets (FLA) and follow the RBI discourse guidelines.

FERA regulates foreign payments and conserves foreign exchange transactions. FEMA enhances India's foreign exchange reserves and emphasises the promotion of foreign payments and trade.

FEMA plays a major role in regulating foreign direct investments in India. It sets rules for capital account transactions, including sectoral limits, approval routes, and compliance requirements, ensuring the smooth and legal flow of foreign funds into the country.

Yes, NRIs living in Kuwait must file an Income Tax Return (ITR) in India if they generate any taxable income from India, such as:

Rental income from property in Idnia.
Capital gains from the sale of property, shares, or mutual funds.
Interest income earned from the NRI bank account.
Total income sourced in India exceeding he basic exemption limit.
For claiming the TDS deducted refunds.

If NRIs receive only a salary in Kuwait and have no taxable income in India, ITR filing is generally not required; however, it may still be advisable in some cases.

India and Kuwait have a double tax avoidance agreement ( DTAA ). This agreement ensures that an NRI is not taxed on the same income twice.

The India-Kuwait DTAA

Clarifies which country will tax which type of income.
Helps you avoid double taxation on salary, interest, and other income sources.
It provides clarity on residential status and tax treatment.

Now that Kuwait does not levy any personal income tax on salaries, the DTAA mainly helps in tax compliance and classification rather than claiming a tax credit.

No, salary earned in Kuwait is not taxable in India if your residential status in India under the Income Tax Act is that of an NRI.

Your Kuwait salary will only be taxable in India under certain conditions

You become a resident in Idnia during the financial year.
The salary is received for services rendered in India.

But for NRIs working and residing in Kuwait, foreign salary income is not taxable in India.

The taxability of bank interest for NRIs in Kuwait is as follows.

NRO Account interest: Taxable in India.
NRE Account interest: Completely tax-free in India.
FCNR account interest: Completely tax-free in India.

Yes, as an NRI, to file your income tax return, you need a valid PAN card to file an income tax return in India from Kuwait.

You need a PAN for the following purposes.

File ITR Online
Claims TDS refunds
Report capital gains or the rental income.
Operate NRO/NRE bank accounts.

Additionally, if you do not have a PAN, you must apply for it before filing your return.

Yes, NRIs residing in Kuwait can file their indian income tax return completely online without ever visiting India.

Online filing of the return includes.

Secure and easy document upload.
Tax computation and compliance review.
Online ITR filing on the Income Tax Portal.
E-verification via me and other approved methods.
You can track your refund online.