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Wrong-account credits
Rent, dividends, sale proceeds or other India-source income credited into NRE instead of NRO is the single most common red flag. It is detectable on a normal account review and is a clear FEMA contravention.
Short answer. Most FEMA scrutiny does not come from exotic transactions. It comes from a handful of patterns — Indian income credited to NRE, large NRO remittances without Form 145/146 (formerly 15CA/15CB), late FC-GPR, and round-tripping of related-party funds. Check the applicable rules and documentation before acting.
Last reviewed: · Reviewed by Regi Tom Antony, FCA
Rent, dividends, sale proceeds or other India-source income credited into NRE instead of NRO is the single most common red flag. It is detectable on a normal account review and is a clear FEMA contravention.
Outward remittances from NRO without proper Form 145/146 (formerly 15CA/15CB), or with mismatched income classification, are routinely held back. Inconsistency between the form, the TDS deducted and the underlying transaction is the issue.
FDI into Indian entities triggers FC-GPR filings within 30 days. Late or missing filings are a frequent finding in audits — and a compounding case waiting to happen.
Splitting remittances to stay under per-year limits, routing funds through relatives, or sending money out and back in to relabel its character all attract scrutiny. The substance test, not the form, is what RBI applies.
Banks apply FEMA through KYC and transaction monitoring. Patterns that commonly trigger queries include credits into NRE that do not look like foreign earnings, repeated round-sum transfers between NRO and family accounts, outward remittances where Form 146 (formerly 15CB) describes the income differently from the TDS deducted, and resident savings accounts still active years after the holder moved abroad.
Banks, registrars and property buyers report transactions to the tax department, and they appear in your Annual Information Statement. A FEMA problem therefore often surfaces first as a tax notice — for example, a property sale reported in AIS with no matching capital gains disclosure, or interest reported on an account that should have been redesignated.
Stop the pattern first: move income to the correct account, update KYC and close dormant resident accounts. Then quantify each affected transaction with its date and amount. Depending on its nature, the fix may be a regularisation with your bank, a late-submission fee for a missed filing such as FC-GPR, or a compounding application to RBI. Acting before a regulator asks usually means a lower cost and a shorter process.
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