Cleaning up a decade of NRE/NRO drift with a compounding application

Oil & gas executive with three NRE accounts, two demat folios, and a missed redesignation from a 2019 return.

• Client briefly returned in 2019, never redesignated NRE → resident — a FEMA default that compounds in scrutiny.
• Two demat folios were KYC'd as resident; a third as NRI. Dividends flowed across both — TDS chaos.
• Three years of Schedule FA were thin / incorrect.

1. Mapped the full account + folio landscape; identified the FEMA breach and quantified the exposure.
2. Re-architected to one NRE + one NRO with a single bank; closed legacy folios.
3. Filed compounding application with RBI — voluntary disclosure, full backup.
4. Re-filed Schedule FA for 3 FYs under Section 139(5) with corrected asset-level disclosure.

• Compounding settled, no escalation.
• Account architecture reduced from 5 to 2; dividend flow cleaned up.
• Disclosure history corrected and audit-defensible.

FEMA defaults don't expire — they age. Voluntary compounding is almost always cheaper than waiting for a notice.