Dear Taxreply,

Thanks for the good work. I have a few specific queries as below. 

I had moved outside India for job purpose in march 2012 ( to UAE). Till AY 12-13, I had filed my salary income return as I was working in India till 28th feb'12. After moving out to UAE , I have continued to operate my resident bank account online and also share Dmat Account. In the meanwhile I also opened an NRI account with a different bank and placed an NRI FD in the same. I haven't filed any return after coming outside India. Apart from this, my father is also maintaining a Dmat account in my name and continue to trade in that. I have few other resident bank accounts as well in India managed by my father at my hometown. Now I have below queries. 

1. I am not filing returns since Previous year 2012-13 as my salary income is not taxable. Though I still have some other nominal incomes from FDs done before I came outside, from interest on bank deposits, dividend incomes & capital gains ( including STCG). 

Is this fine not to file IT return in such case? The total interest income should be within the limits of basic exemption but Taxable capital gain could be higher. Logistically I find it difficult to file my return as half of the documents & accounts are managed by my father in hometown and other half are with me where I used to work. Also, I don't want to highlight few speculative transactions which I did in my personal Dmat account without notice of my father and incurred huge losses.  

2. I understand that Ideally I should only operate an NRI bank account and NRI Dmat account, but is it grossly illegal to operate a resident account after becoming an NRI ? or this is something generally goes unchecked or overlooked by tax authorities.

3. Can I continue to operate like this or I have to must shift to NRI accounts for bank and Dmat accounts. 

4. In year 2013 I made huge speculative losses (in currency trading) in my resident Dmat account which I was operating online despite after becoming an NRI. I never filed any return so I am not sure If I will be eligible to claim the set-off benefit of Capital losses now. 

5. Similarly in year 2014 I have high short term capital gains from shares which ( if allowed) can completely set off the speculative losses I had in 2013. I am not in a position to file return even for this, since I am afraid that I am operating a resident account. 

6. What about the other bank accounts in my name at my hometown and the capital gains in Dmat account which my father is still operating in my hometown. 

Is there a risk if I continue operating the way I am currently doing ? I can limit my transaction in Dmat account so that most of the gain are long term capital gains tax which are exempt. 

I request you to suggest me how to address all this as I have no intention of any tax concealment and dont want to be exposed to any penalty for concealment of Income. I would like to avoid opening an NRI Dmat account as the costs and brokerage for the same is very high. 

Dear Abhishek,

Pl find our reply on your query below.

1) Yes, operating resident bank accounts after becoming NRI is grossly illegal in the eyes of Law. You have to either get it converted to NRI Accounts or you can get it converted into Resident Joint Holders Account with your Dad on "Former or Survivor basis". RBI has allowed the same vide circular dated 09/01/2014. Below is the link of RBI circular.

http://www.rbi.org.in/scripts/BS_CircularIndexDisplay.aspx?Id=8681

Is is not advised to wait for the authorities to caught you and held liable for the non-compliance. You should not continue with this arrangement for sure.

2) You cannot set off the losses made in 2013 with profits made in 2014, for the reason you have not filed your income tax return before due date u/s 139(1). You can only set off the losses of 2013 with profits of 2013. In other words carry-forward of losses is not allowed in case of belated / late returns. 

In our opinion, you should do the law compliance and get your accounts converted either in NRI Accounts or Resident Joint Holder Account on "former or survivor" basis.

Kind Regards
TaxReply.com

There is another option for operating Indian bank account for indian income or transactions by converting his bank account in India as a NRO ACCOUNT while he continues to be abroad as a NON RESIDENT.