Differentiating fake NRIs from the real ones

By ushering the end of the special status, the normally resident Indians, masquerading as pseudo NRIs should be stopped from holding accounts in tax havens

Washington-based International Consortium of Investigative Journalists has just  put out an exposé on international money laundering,  with the names of as many as India’s 612 top industrialists, professionals, politicians (including two MPs) and others. At a subsequent news conference finance minister P Chidambaram said: “Yes. We have taken note of the names and inquiries have been put in motion in respect of the names that have been exposed.”


News reports also mention that among the names listed are some NRIs who make use of tax havens while others have denied having accounts abroad.  


Some overly rich NRIs, included in the listing, have been found to grossly abuse the special tax and foreign exchange status granted under Indian statutes. It is this misuse that needs to be curbed effectively by revisiting the facilities, more particularly in the light of the currently prevailing favourable circumstances in India that justify the changes.


It needs to be pointed out here that the term “Non-resident Indian,” (NRI), nowhere finds a place in Indian legal lexicon. It is not explicitly defined inasmuch as it is inclusively indicated both in the Indian Income Tax (I-T) Act, 1962 and the Foreign Exchange Management Act, 1999 (FEMA).


Section 6 of the I-T Act considers any “a person as resident in India” as one who has a stay in India for more than 182 days. Section 2(v) of the FEMA, lays down “a person resident in India means a person residing in India for more than 182 days... but does not include any person who has gone out of India or who stays outside India, in either case for taking up employment outside India, or for carrying on outside India a business or vocation or for any other purpose, in such circumstances as would indicate his intention to stay outside India for an uncertain period.” The same criteria conversely apply for anyone who has come to and stays in India.


It must be pointed that initially, the tax and exchange benefits were primarily extended to encourage homeward the monies earned by the millions of Indian workers, professionals, salary earners—comprising Indian Diaspora spread far and wide across the globe. More particularly at a time when India was facing very acute shortage of valuable foreign exchange to pay for essential imports to bridge the large forex gaps.


The NRIs had then all along preferred to park their funds with the banks abroad as they considered the banking system in America, Europe and Gulf countries to be far safer than that those in India, even when these banks paid relatively lesser rate of interest and charged them for maintaining the accounts. Banks in the Gulf insisted on maintaining large minimum balances in savings accounts and made it imperative for small time depositors to remit most of their earnings through exchange companies to their families back home.


Then came the financial meltdown with a collapse of banks, big and small, in the US and its cascading effect in the Eurozone, particularly Iceland and Cyprus, the end of the oil boom in the Middle East, wars in Kuwait and Iraq and collapse of the Dubai real estate boom. This has made parking funds in overseas banks a very risky proposition for NRIs/ PIOs. The public sector banks in India are backed by a tacit sovereign state guarantee and subjected to strict oversight by its banking regulator – the Reserve Bank of India. 


Over the last decade the Indian foreign exchange situation has improved considerably with the rupee heavily insulated. Our robust banking system has fortunately been able to withstand the crashes that occurred in Mexico, Argentina and Korea, which had economies almost similar to India.


Today, e-banking in India has facilitated operating bank accounts from any remote corner of the world with a click of a mouse without having to physically visit the bank. This has prompted people of Indian origin all over the world to repatriate their funds from their countries to park them back home, into dollar denominated accounts as well, in India.


In the light of the changed conditions here, there is a need to initiate a wider public debate on a rethink on the framework to withdraw the special facilities to NRIs by differentiating between the fake or bogus that exploit and abuse the system while at the same time protecting the genuine.


First of all, the concept of the period of stay either here or there has to be done away with. Anyone born and brought up in India, is purely of Indian origin, with a family in India, residences, villas and farm houses in many cities besides owning substantial business interests, director/chairmanships in India should be expressly denied the special status.


Practically all business tycoons own private Lear jets enabling them to fly in and out of India at will. They bend their stay period to enable them to circumvent the law. This should be prevented by deleting in toto from both the I-T/DTC and FEMA the relevant clauses relating to their stays in and out of the country, mentioned above.


Even when required to include and offer for tax in the US their world income, the PIOs there who had not declared substantial interest tax-free earned on their NRE and FCNR accounts with Indian banks have been nabbed by the US IRS. Possibly this is happening in other countries too. Being NRIs they do not also pay Indian taxes. Getting the best of both worlds should not be permitted. They can pay tax in either country to benefit from the Double Taxation Avoidance Treaties that India has signed with most countries that permit them to set off taxes paid in any one country.


By ushering the end of the special status, the normally resident Indians masquerading as pseudo NRIs should be stopped from holding accounts in tax havens that can any way be made use by genuine NRIs abroad.


With the meltdown in the West and the reverse brain drain arising out of gradual return of our people, the term NRI now assumes a new connotation of Now Returning Indian from the once sarcastic Not Required Indian or Not Reliable Indian!


(Nagesh Kini is a Mumbai-based chartered accountant now turned activist.)


SEBI busts fake investment syndicate; perceives large-scale fraud

SEBI's probe found that an investor was receiving calls from agents and brokers of MF and insurance companies asking him to invest more money to get an impressive return on products bought by his deceased son

Market regulator Securities and Exchange Board of India (SEBI) has unearthed a fake investment syndicate in the national capital, wherein a large number of people could have been defrauded in the name of investments made by their deceased family members.


Acting on an individual complaint, the market regulator probed a case of an investor getting phone calls for impressive returns on the mutual fund products purchased by his deceased son, provided the person makes some further investments.


“The ‘agent’ informed the complainant that his son had made investments in mutual funds which are about to mature and on maturity the complainant will get only Rs5 lakh. However, the ‘agent’ further stated that if the complainant makes a further investment of Rs2.5 lakh, he would get maturity proceeds of Rs12.5 lakh,” SEBI said.


The investigations department of SEBI conducted preliminary investigations where it was found that the phone numbers from which the ‘agent’ had called were in some others’ name and the company was also in a different name. Sensing a clear attempt to defraud, cheat and misappropriate as well as mis-sell financial products, SEBI said it deputed an official to visit the ‘complainant’ at the time of the visit of the ‘agent’.


SEBI said it also sought assistance from the Economic Offences Wing (EOW) of the Delhi Police. “On perusal of the forms and after preliminary enquiries, the suspicions were confirmed that indeed there was an organised attempt by several people to defraud and mis-sell and accordingly a first information report (FIR) is being lodged with Delhi Police. It is suspected that the number of victims of such fraudulent attempts could be much higher, which would be revealed in due course after further investigations by Delhi Police and SEBI,” the market regulator said in a statement.





4 years ago

Now a days people have become so used to easy money that they don't mind fraud, whatever the consequences be! God save the country.


ashwin bahl

In Reply to CA PRADEEP AGARWAL 4 years ago

@Pradeep me think's even god has left Indian shores, given up in fact :)

ashwin bahl

4 years ago

there is much more to be unearthed!


4 years ago

Being over greedy results in being defrauded.

Vaibhav Dhoka

4 years ago

Some fraudsters are collecting data from insurance companies or MFs and call persons directly to add amount to surrender value in case of policies or churn mutual fund investment.All are e-frauds.

EC ready with new voting machines to maintain paper record

The EC stated that trial of Vote Verifier Paper Audit Trail in EVMs has been done and the machines could be incorporated in elections after the Centre approves and provides funds for their manufacturing

The Election Commission (EC) today informed the Supreme Court it has approved improvised version of EVMs (electronic voting machines) to maintain paper record of each vote and these can be used in elections once the Centre and political parties endorse them. 
The Commission submitted before a bench of justices P Sathasivam and Ranjan Gogoi said that trial of Vote Verifier Paper Audit Trail (VVPAT) in EVMs has been done and the machines could be incorporated in elections after the Centre approves and provides funds for their manufacturing. 
Senior advocate Ashok Desai, appearing for the Commission, said 13 lakh VVPAT machines would be needed for the general elections and Rs1,692 crore would be required the purpose. 
He said the new machines cannot be used in the coming Karnataka state assembly elections but the Commission would convene a meeting of all political parties after the polls to use the EVMs in subsequent elections. 
The apex court was hearing a plea of Janata Party chief Subramanian Swamy seeking direction to the poll panel to ensure that EVMs should have a paper trail and issue a receipt to each voter. 
The Commission, however, clarified that paper receipts would not be given to voters and but collected in a box.




4 years ago

EC's WEB says that 1400 Voters are given one Polling Booth with one Voting Machine and accordingly EC is Providing Polling Booths. From 08.00 AM to 05.00 PM i.e.600 Minutes.Thus 1400 Voters are not alloted even Half a Minute Time for Voting.In Practice Around 5 Minutes are taken by Each Voter as Each one has to go throug 10 or 20 Names in the Ballot Paper and Vote.While Abroad Voters are Comfortably Voting,Indians are Struglling to Vote ,Waiting in Rain / Sun Heat,unable to Know his/her Polling Booth first and after knowing it Standing in Que for Long Hours, that too with Present 50% Voting.Some are fainting,Heart Attacked,Hospitalised,etc.. In Biggest Democracy in Globe,Indian Voters Deserve Better Facility for Voting as Thousands of Crores are being Spent For Elections,EC is hesitating to spend to Create Better Facilities to Voters. Thus EC is failing in its Basic Duty.

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