No agri land, no resident account, no ITR-1, no SGBs, no new PPF, no intraday trading.

BannedRestrictionsProhibited

20 Things NRIs Cannot Do in India — Legal Restrictions & FEMA Prohibitions (2026)

Most NRI compliance guides tell you what you must do -- file returns, declare foreign assets, report income. This article is different. This is about what you cannot do. The prohibitions. The bans. The hard legal lines that Non-Resident Indians must never cross.

Violating these restrictions does not just mean a notice or a late fee. It can mean FEMA penalties of up to three times the amount involved, prosecution under the Benami Transactions (Prohibition) Act with up to seven years of imprisonment, or permanent disqualification from holding certain positions. The consequences are severe because the law treats these not as oversights but as violations.

Whether you are an NRI living in the US, UK, UAE, Singapore, Canada, or Australia, this guide covers the 20 critical things you are legally prohibited from doing in India -- with the exact legal basis, applicable penalties, and any available workarounds for each.

PROPERTY RESTRICTIONS

1. Cannot Buy Agricultural Land, Farmhouse, or Plantation Property

What is banned: An NRI or PIO (Person of Indian Origin) cannot purchase, acquire, or hold agricultural land, farmhouse property, or plantation property anywhere in India. This prohibition applies regardless of which state the property is in, and regardless of whether the NRI holds an Indian passport or OCI card.

Legal basis: Section 6(5) of FEMA, 1999, read with Regulation 4 of the Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2018 (commonly referred to as FEMA 21(R)). The RBI Master Direction on this (Master Direction No. 12/2015-16, updated through 2025) explicitly states that a person resident outside India shall not acquire agricultural land, plantation property, or farmhouse in India.

Penalty for violation: Under Section 13 of FEMA, a penalty of up to three times the sum involved can be imposed. If the amount is not quantifiable, the penalty can be up to INR 2 lakh, with an additional penalty of INR 5,000 per day for continuing violations. The property itself can be ordered to be confiscated.

Workaround: An NRI can inherit agricultural land or farmhouse property from a person resident in India (or from another NRI who had acquired it in compliance with FEMA). However, the NRI cannot sell this inherited agricultural land to another NRI -- it can only be sold to a person resident in India. NRIs who wish to engage in agriculture may consider leasing arrangements, though these have their own regulatory complexities. Additionally, if the NRI returns to India and becomes a resident, the restriction no longer applies.

2. Cannot Hold Property Through Benami Arrangement

What is banned: An NRI cannot circumvent any property restriction (including the agricultural land ban above) by purchasing property in the name of a relative, friend, or any other person while the NRI is the real beneficial owner. This is a benami transaction and is a criminal offence in India.

Legal basis: The Prohibition of Benami Property Transactions Act, 1988 (as amended in 2016). Section 3 of this Act prohibits any person from entering into a benami transaction. Section 2(9) defines a benami transaction as any transaction where property is held by or transferred to a person, but the consideration has been provided by another person. The 2016 amendment gave the Act real teeth by establishing Adjudicating Authorities and the Appellate Tribunal.

Penalty for violation: Under Section 3(2), any person who enters into a benami transaction shall be punishable with rigorous imprisonment for a term not less than one year but which may extend to seven years, and shall also be liable to a fine which may extend to 25% of the fair market value of the property. Under Section 5, any benami property is liable to confiscation by the Central Government. The benamidar (person in whose name the property is held) also faces prosecution.

Workaround: There is no workaround for benami transactions. The law is absolute. NRIs who wish to own property in India must do so in their own name, through proper banking channels (NRE/NRO/FCNR accounts), and limited to the categories of property they are permitted to acquire (residential and commercial).

3. Cannot Receive Property Sale Proceeds in Cash

What is banned: When an NRI sells property in India, the entire sale consideration must be received through proper banking channels -- credited to an NRO account. The NRI cannot receive the sale proceeds in cash, even partially. This applies regardless of the transaction value.

Legal basis: Section 269SS and Section 269ST of the Income Tax Act, 1961. Section 269SS prohibits receipt of any amount of INR 20,000 or more in cash as a loan or deposit. Section 269ST (inserted by Finance Act 2017) prohibits receipt of INR 2 lakh or more in cash in aggregate from a person in a day, in respect of a single transaction, or in respect of transactions relating to one event or occasion. Additionally, FEMA regulations require all property transactions by NRIs to be routed through banking channels.

Penalty for violation: Under Section 271DA, a penalty equal to 100% of the amount received in cash can be imposed. Under FEMA, separate penalties of up to three times the amount apply. The buyer also faces penalties under Section 269SS for making payment in cash.

Workaround: Ensure all property transactions are conducted entirely through banking channels. The buyer should pay via cheque, demand draft, RTGS, NEFT, or any other electronic banking mode, directly to the NRI's NRO account. Obtain proper documentation including TDS certificates (Form 16A), registration documents, and bank statements showing the credit.

BANKING & TAX RESTRICTIONS

4. Cannot Hold or Operate a Resident Savings Account

What is banned: Once an Indian citizen becomes an NRI (i.e., ceases to be a person resident in India under FEMA), they cannot continue to hold or operate a regular resident savings bank account. All existing resident savings accounts must be redesignated as NRO (Non-Resident Ordinary) accounts, or closed, upon change in residential status.

Legal basis: Section 6(6) of FEMA, 1999, read with RBI Master Direction - Know Your Customer (KYC) Direction, 2016, and FEMA (Deposit) Regulations, 2016. Regulation 5 of the Deposit Regulations requires that when a person resident in India becomes a person resident outside India, any account held by such person shall be designated as an NRO account. RBI Circular RBI/2019-20/146 further reinforces this requirement.

Penalty for violation: Under Section 13 of FEMA, penalties of up to three times the amount involved apply. Banks that fail to redesignate accounts are also liable. Additionally, any transactions conducted through an improperly maintained resident account can be treated as FEMA violations, attracting compounding proceedings under Section 15 of FEMA.

Workaround: Inform your bank about your change in residential status immediately upon becoming an NRI. Convert your existing savings accounts to NRO accounts. You may also open NRE (Non-Resident External) accounts for parking foreign earnings, and FCNR (Foreign Currency Non-Resident) accounts for holding deposits in foreign currency. Joint accounts with residents are permitted only in NRO accounts, not NRE accounts (the joint holder must also be an NRI for NRE accounts).

5. Cannot Use Form 15G/15H to Avoid TDS

What is banned: NRIs cannot submit Form 15G (for individuals below 60 years) or Form 15H (for senior citizens) to their bank or any other deductor to request non-deduction or lower deduction of TDS. These forms are exclusively available to residents of India whose total income is below the taxable threshold.

Legal basis: Section 197A of the Income Tax Act, 1961. Section 197A(1) specifically requires that the declaration in Form 15G can only be made by a person who is resident in India and whose estimated total income for the relevant year is below the basic exemption limit. Section 197A(1C) for Form 15H applies only to a resident senior citizen. NRIs are explicitly excluded from the scope of these provisions.

Penalty for violation: If an NRI files a false Form 15G/15H, it constitutes a false declaration under the Income Tax Act. This can attract penalties under Section 277 for false statements (prosecution with imprisonment of six months to seven years). The bank or deductor that accepts such a form from an NRI can also be held liable as an assessee in default under Section 201.

Workaround: NRIs who wish to reduce TDS on their Indian income should apply for a Lower Deduction Certificate under Section 197 of the Income Tax Act from the Assessing Officer. By filing Form 13, the NRI can request that TDS be deducted at a lower rate based on their actual estimated tax liability. Alternatively, NRIs can claim treaty benefits by furnishing a Tax Residency Certificate (TRC) from their country of residence along with Form 10F.

6. Cannot Claim Section 87A Rebate

What is banned: NRIs cannot claim the tax rebate under Section 87A of the Income Tax Act. This rebate (up to INR 25,000 under the new tax regime for income up to INR 7 lakh, or INR 12,500 under the old regime for income up to INR 5 lakh, as applicable for FY 2025-26) is available only to resident individuals.

Legal basis: Section 87A of the Income Tax Act, 1961 explicitly states: "An assessee, being an individual resident in India..." -- the very first qualifying condition restricts the rebate to resident individuals. This has been consistently upheld in tax assessments and by the CBDT.

Penalty for violation: If an NRI incorrectly claims the Section 87A rebate in their tax return, it results in an incorrect tax computation. This can lead to a demand notice under Section 143(1) or 143(3), interest under Section 234A/234B/234C, and a penalty under Section 270A for underreporting of income (50% of tax payable on the underreported income) or misreporting (200% penalty).

Workaround: There is no direct workaround. NRIs must pay tax on their Indian income at full applicable slab rates. However, NRIs can avail of Double Taxation Avoidance Agreement (DTAA) benefits with their country of residence to avoid paying tax twice on the same income. Proper tax planning through permissible deductions under Chapter VI-A (Section 80C, 80D, etc.) under the old tax regime can also help reduce the tax burden.

7. Cannot File ITR-1 (Sahaj)

What is banned: NRIs cannot file their income tax return using ITR-1 (Sahaj), which is the simplified return form. Even if the NRI's income profile is simple (only salary and interest income below INR 50 lakh), they must use ITR-2 or ITR-3.

Legal basis: The Income Tax Return Forms notification issued by CBDT each year under Section 139 of the Income Tax Act. The ITR-1 form eligibility conditions explicitly state that it is for "an individual being a resident (other than not ordinarily resident)." The instructions for ITR-1 for AY 2026-27 carry forward this restriction.

Penalty for violation: Filing the wrong ITR form makes the return defective under Section 139(9). The Assessing Officer issues a notice to the assessee to rectify the defect within 15 days. If not rectified, the return is treated as if it was never filed, attracting penalties under Section 234A (interest for late filing), Section 234F (late filing fee of up to INR 5,000), and potential best judgment assessment under Section 144.

Workaround: NRIs must file ITR-2 (if they have no business or professional income) or ITR-3 (if they have business or professional income). These forms are more detailed and include specific schedules for foreign income, foreign assets (Schedule FA), and claiming DTAA benefits (Schedule TR). Using proper tax filing software or engaging a qualified Chartered Accountant ensures the correct form is used.

INVESTMENT RESTRICTIONS

What is banned: An NRI cannot open a new PPF account after becoming a non-resident. If an NRI had an existing PPF account opened while they were a resident, they can continue it until maturity but cannot extend it beyond the original maturity period. No new contributions should be made after the account holder becomes an NRI (though this is inconsistently enforced in practice, and some post offices and banks still accept contributions).

Legal basis: The Public Provident Fund Scheme, 2019 (notified under the Government Savings Promotion Act, 2019, which replaced the Government Savings Bank Act, 1873). Paragraph 4(1) of the PPF Scheme states that "any individual" may open a PPF account, but the Ministry of Finance Notification F.No.2/1/2018-NS-II dated October 4, 2017, clarified that NRIs cannot open new PPF accounts. DOPT clarification of May 2018 further confirmed that existing accounts can be maintained until maturity but shall not earn interest beyond the maturity date if the subscriber is an NRI.

Penalty for violation: If an NRI opens a new PPF account or continues an existing one beyond maturity, the account can be deemed irregular. Under the revised guidelines, irregular accounts may earn only post office savings account interest rate (currently 4%) instead of the PPF rate (currently 7.1%). The tax-free benefit under Section 80C may also be denied, and the maturity proceeds may lose their tax-exempt status under Section 10(11).

Workaround: If you have an existing PPF account from when you were a resident, continue it until maturity. Consider alternative tax-efficient investments such as NRE Fixed Deposits (interest is tax-free in India), Equity Linked Savings Schemes (ELSS) for Section 80C benefits, or DTAA-optimized investment structures. Upon returning to India and becoming a resident again, you can open a fresh PPF account.

What is banned: NRIs cannot purchase Sovereign Gold Bonds issued by the Government of India through RBI. The subscription is restricted to resident individuals, Hindu Undivided Families (HUFs), trusts, universities, and charitable institutions.

Legal basis: The Sovereign Gold Bond Scheme notification issued by the Ministry of Finance and RBI. Each tranche notification explicitly lists eligible investors and excludes NRIs. The eligibility clause reads: "The Bonds under this Scheme may be held by a person resident in India, being an individual, in his capacity as such individual, or on behalf of a minor child, or jointly with any other individual." This is based on the Government Securities Act, 2006 and RBI guidelines on gold bonds.

Penalty for violation: If an NRI manages to subscribe to SGBs (through a resident account that was not properly converted, for instance), the bonds can be declared void or irregular. Additionally, operating a resident account as an NRI to purchase SGBs constitutes a FEMA violation with penalties under Section 13 of FEMA.

Workaround: NRIs can invest in gold through other legal routes -- physical gold, gold ETFs (Exchange Traded Funds) traded on Indian stock exchanges (if they have a PIS-linked demat account), or international gold funds in their country of residence. However, an NRI who becomes a resident can hold SGBs acquired during residency and can subscribe to new ones after returning.

10. Cannot Invest in Senior Citizens Savings Scheme (SCSS)

What is banned: NRIs cannot open an SCSS account, even if they are above 60 years of age. The scheme is restricted to resident Indian citizens who are 60 years or above (or 55 years and above for retired defence personnel, or those who have taken voluntary retirement at 50+).

Legal basis: Senior Citizens Savings Scheme, 2019 (notified under the Government Savings Promotion Act, 2019). The scheme rules explicitly define an eligible depositor as an individual who has attained the age of 60 years and is a citizen of India resident in India. NRIs and PIOs are excluded.

Penalty for violation: An account opened in violation will be treated as irregular and may be closed by the deposit office. Penalty interest and reversal of benefits may apply. If the account was opened using a resident savings account in violation of FEMA, additional FEMA penalties apply.

Workaround: Upon returning to India and re-establishing resident status under FEMA, eligible individuals can open an SCSS account. Until then, NRIs can consider NRE/FCNR fixed deposits for safe, fixed-income returns, or tax-free bonds available in the secondary market. In several DTAA jurisdictions, interest income from NRE deposits is completely tax-free in India.

11. Cannot Do Intraday or F&O Trading (Only Delivery-Based via PIS)

What is banned: NRIs cannot engage in intraday trading (buying and selling shares on the same day), futures and options (F&O) trading, or any speculative trading in the Indian stock market. NRIs can only execute delivery-based equity transactions through the Portfolio Investment Scheme (PIS) of the RBI.

Legal basis: RBI Master Direction - Foreign Investment in India (Master Direction updated through 2025), read with FEMA (Non-Debt Instrument) Rules, 2019. The PIS (Portfolio Investment Scheme) governed by Regulation 5(2) of FEMA (Transfer or Issue of Security by a Person Resident outside India) Regulations requires that all share transactions by NRIs must be delivery-based and routed through a designated PIS bank account. SEBI Circular CIR/MRD/DP/22/2012 and subsequent updates restrict NRI participation to delivery-based secondary market transactions.

Penalty for violation: FEMA violations carry penalties of up to three times the amount under Section 13. Additionally, SEBI can impose penalties under SEBI Act, 1992 for trading without proper authorization, including debarment from the securities market. The PIS account and linked demat/trading accounts can be frozen.

Workaround: NRIs can invest in Indian equities through delivery-based trading on both NSE and BSE via PIS. They can also invest through mutual funds (both equity and debt) without the PIS route. NRIs from non-FATF compliant countries may face additional restrictions. For derivatives exposure, NRIs can explore international markets in their country of residence or invest in India-linked ETFs listed on foreign exchanges.

FEMA & REMITTANCE RESTRICTIONS

12. Cannot Exceed USD 1 Million Per Year for NRO Repatriation Without RBI Approval

What is banned: NRIs cannot repatriate (transfer abroad) more than USD 1 million per financial year from their NRO account without prior approval from the Reserve Bank of India. This limit applies to the net after-tax balance and includes all types of income and permissible credits to the NRO account -- rent, dividends, interest, pension, and sale proceeds of eligible assets.

Legal basis: FEMA (Remittance of Assets) Regulations, 2016, read with RBI Master Direction on Liberalised Remittance Scheme (LRS). Schedule 4 of FEMA Deposit Regulations, 2016 specifies that an NRI may remit up to USD 1 million per financial year out of the balance held in NRO accounts, subject to applicable taxes. Amounts exceeding this limit require specific RBI approval through the Authorised Dealer (AD) bank.

Penalty for violation: Unauthorized remittance beyond the limit constitutes a FEMA contravention under Section 4 (dealing in foreign exchange without authorization). Penalty under Section 13 can be up to three times the amount remitted in excess. The AD bank facilitating such remittance without RBI approval also faces regulatory action.

Workaround: For legitimate needs exceeding USD 1 million, NRIs can apply to the RBI through their AD bank with supporting documentation. Sale proceeds of immovable property acquired by inheritance have specific rules -- up to USD 1 million per financial year can be repatriated. For property purchased using NRE/FCNR funds, repatriation can be made to the extent of the original investment in foreign exchange (no USD 1 million cap on the original investment amount). Proper tax planning and phasing remittances across financial years can also help manage within limits.

13. Cannot Receive Indian Income in Foreign or Resident Account

What is banned: Income earned in India by an NRI (rent, salary for work performed in India, capital gains, business income, professional fees) cannot be credited to a foreign bank account or to a resident savings account in India. All Indian-sourced income must be credited to an NRO account.

Legal basis: FEMA (Deposit) Regulations, 2016, specifically Regulation 5 which governs NRO accounts. RBI Master Direction on Opening and Maintenance of Rupee/Foreign Currency Vostro Accounts of Non-Resident Exchange Houses states that current income of NRIs in India is to be credited to NRO accounts. The IT Act provisions on TDS (Section 195 for payments to non-residents) also operate on the assumption that payments are made to NRO accounts or through proper banking channels with tax deducted.

Penalty for violation: FEMA penalties under Section 13 -- up to three times the amount. If the income is received in a resident account, both the NRI and the payer can be held liable. Receiving Indian income directly abroad without proper TDS can also attract prosecution under Section 276B of the Income Tax Act (failure to deduct/pay TDS) with imprisonment of three months to seven years.

Workaround: Ensure all Indian income is properly routed to your NRO account. From the NRO account, after deduction of applicable taxes (and obtaining a CA certificate in Form 15CB where required), you can repatriate funds to your foreign account within the USD 1 million annual limit. For salary income, if your employer is paying you for services in India, the amount after TDS should be credited to your NRO account.

14. Cannot Send Money Abroad Without Form 15CA/15CB (Above INR 5 Lakh)

What is banned: Any remittance from India to a foreign country by or on behalf of an NRI that is chargeable to tax cannot be made without filing Form 15CA online and (for amounts exceeding INR 5 lakh in aggregate in a financial year for payments that are taxable and not covered by Section 195(6) specified list) obtaining a Chartered Accountant's certificate in Form 15CB.

Legal basis: Section 195(6) of the Income Tax Act, 1961, read with Rule 37BB of the Income Tax Rules, 1962 (as amended). Rule 37BB requires that the remitter furnish information in Form 15CA to the Authorised Dealer bank. For remittances exceeding INR 5 lakh (other than those specifically exempted under Rule 37BB), a certificate from a Chartered Accountant in Form 15CB is mandatory before filing Form 15CA. CBDT Notification No. 67/2022 and subsequent updates specify the categories and thresholds.

Penalty for violation: Under Section 271-I, a penalty of INR 1 lakh can be imposed for failure to furnish information or furnishing inaccurate information under Section 195(6). Additionally, the AD bank can refuse to process the remittance without the required forms, and the remitter may face prosecution for non-compliance. If TDS was not properly deducted, penalties under Section 201 (assessee in default) and Section 271C (penalty for failure to deduct TDS) also apply.

Workaround: Ensure compliance by engaging a Chartered Accountant to issue Form 15CB before initiating any taxable remittance above INR 5 lakh. File Form 15CA on the Income Tax e-filing portal and provide the acknowledgment to your bank. Certain remittances are exempt from Form 15CB (though Form 15CA Part A is still required) -- these include remittances that are not chargeable to tax and those covered under the specified list in Rule 37BB. Work with your CA to determine the correct part of Form 15CA applicable to your remittance.

15. Cannot Hold a Resident Demat Account

What is banned: An NRI cannot hold or operate a regular resident demat (dematerialized securities) account once they become a non-resident. All existing resident demat accounts must be converted to NRI demat accounts (either repatriable or non-repatriable) upon change in residential status.

Legal basis: SEBI Circular CIR/MRD/DP/22/2012, read with Depository regulations and FEMA guidelines. SEBI and the depositories (NSDL and CDSL) require that the residential status in the demat account matches the actual residential status of the holder. RBI's PIS requirements mandate that share transactions by NRIs be routed through designated PIS accounts linked to NRI demat accounts.

Penalty for violation: Operating a resident demat account while being an NRI constitutes a violation of FEMA and SEBI regulations. FEMA penalties under Section 13 apply. SEBI can impose penalties, freeze the demat account, and debar the individual from the securities market. Any transactions executed through the improperly maintained resident demat account can be declared void or irregular.

Workaround: Convert your existing resident demat account to an NRI demat account by contacting your Depository Participant (DP). You will need to provide updated KYC documents reflecting your NRI status, link the demat account to your PIS bank account, and choose between repatriable (linked to NRE/PIS account) and non-repatriable (linked to NRO account) categories. This conversion preserves your existing holdings.

EMPLOYMENT & VISA RESTRICTIONS

16. Cannot Work in India on a Tourist Visa

What is banned: An NRI (or any foreign national, including OCI cardholders in certain contexts) cannot undertake any employment, paid or unpaid, in India while on a tourist visa. This includes freelancing, consulting, remote work for an Indian company while physically in India, attending business meetings that constitute employment, or any other form of work.

Legal basis: The Foreigners Act, 1946, read with the Indian Visa Manual and guidelines issued by the Ministry of Home Affairs (MHA). The conditions for Tourist Visa (Category T) explicitly prohibit any form of employment or commercial activity. For OCI cardholders, while they have many rights similar to Indian citizens, employment in certain sectors requires additional permissions. The Bureau of Immigration enforces these conditions at entry and can take action based on intelligence or complaints.

Penalty for violation: Deportation, blacklisting from future Indian visa/travel, and penalties under the Foreigners Act (imprisonment up to five years and/or fine under Section 14). The employer engaging someone on a tourist visa can also face penalties. In serious cases, the individual's OCI card can be cancelled under Section 7D of the Citizenship Act, 1955.

Workaround: NRIs holding Indian passports are not affected by this restriction as they can freely work in India (though tax implications arise for stay beyond 182/120 days). NRIs who are foreign passport holders or OCI cardholders and wish to work in India should obtain an Employment Visa (E Visa) or Business Visa as appropriate. For short-term consulting or project work, a Business Visa may suffice, but it must be obtained before commencing any work.

17. Cannot Be Appointed as a Government Employee While NRI

What is banned: An NRI cannot hold a government position or be appointed to government service in India while maintaining non-resident status. Central and state government services require the appointee to be an Indian citizen ordinarily resident in India. NRIs holding foreign citizenship are disqualified from government employment entirely (unless they have OCI/PIO status and the position allows it, which is rare for government posts).

Legal basis: The Constitution of India (Article 16 -- Equality of opportunity in public employment, read with citizenship requirements), relevant Central Civil Services (CCS) Rules, All India Services (AIS) Rules, and individual state service rules. Many government positions additionally require domicile certificates or proof of ordinary residence. The Citizenship Act, 1955, and OCI cardholder guidelines under Section 7A specify that OCI cardholders shall not be entitled to hold certain offices including constitutional posts and government service.

Penalty for violation: Appointment obtained through misrepresentation of residential status can be terminated with retrospective effect. The individual may be required to refund all salary and benefits received. Criminal prosecution for fraud and misrepresentation under the Indian Penal Code (BNS from 2024) is also possible.

Workaround: NRIs who wish to enter government service must return to India, establish ordinary residence, and apply through the regular recruitment process. For NRIs with foreign citizenship who have given up Indian citizenship, some positions in public sector undertakings (PSUs) or government-funded research institutions may be available under special recruitment drives for the diaspora (e.g., the VAJRA scheme for scientists).

VOTING & CIVIC RESTRICTIONS

18. Cannot Vote by Postal Ballot (Must Vote in Person at Registered Constituency)

What is banned: NRIs who are registered as overseas electors cannot vote by postal ballot. As of the current law, NRI voters must physically travel to their registered constituency in India and cast their vote in person at the designated polling station. Despite years of discussion about extending postal ballot or proxy voting to NRIs, no such provision has been enacted into law as of March 2026.

Legal basis: Section 20A of the Representation of the People Act, 1950 (inserted by the Representation of the People (Amendment) Act, 2010) allows an NRI (citizen of India who has not acquired citizenship of another country) to register as a voter. However, Section 60 of the Representation of the People Act, 1951 (which deals with postal ballot) has not been amended to include overseas electors. The Representation of the People (Amendment) Bill, 2017, which proposed proxy voting for NRIs, was passed by the Lok Sabha but lapsed in the Rajya Sabha.

Penalty for violation: There is no violation per se -- the restriction simply means NRIs cannot exercise the postal ballot option. However, attempting to vote fraudulently (e.g., using someone else's identity) is a criminal offence under Section 171D/171F of the IPC (now BNS), punishable with imprisonment.

Workaround: The only current option is to register as an overseas elector under Section 20A and physically travel to India during elections to vote in person. NRI advocacy groups continue to push for postal ballot or e-voting options. NRIs should monitor developments through the Election Commission of India website for any future amendments.

19. Cannot Hold Certain Government and Constitutional Positions

What is banned: NRIs, particularly those who hold foreign citizenship or OCI cards, cannot hold constitutional positions such as President, Vice President, Member of Parliament, Member of Legislative Assembly, Supreme Court or High Court Judge, or any position in the Council of Ministers. Even NRIs who hold Indian passports but reside abroad face practical restrictions as many of these positions require ordinary residence in India.

Legal basis: Articles 58, 66, 84, 102, 173, 191, and 124 of the Constitution of India prescribe eligibility criteria that include Indian citizenship and, in many cases, registration as a voter in a constituency. The Citizenship Act, 1955, Section 7A(2) explicitly lists restrictions on OCI cardholders, including that they are not entitled to be appointed to public services and posts in connection with the affairs of the Union or any State. The Supreme Court has upheld these restrictions in multiple judgments.

Penalty for violation: Any election or appointment obtained in violation is void ab initio. The person may face disqualification proceedings, and any decisions made while holding the position may be challenged.

Workaround: NRIs with Indian citizenship who wish to enter politics or public service must return to India, establish residence, register as a voter, and meet all eligibility criteria for the specific position. NRIs who have acquired foreign citizenship must first obtain OCI status, and even then, most constitutional and government positions remain closed to them. Full re-acquisition of Indian citizenship (requiring surrender of foreign citizenship) is the only complete solution.

OTHER CRITICAL RESTRICTIONS

20. Cannot Claim HRA If No Indian Salary; Cannot Be Karta of HUF Unless Hindu/Sikh/Jain/Buddhist

This entry covers two distinct but important restrictions:

20A -- HRA Restriction: An NRI cannot claim House Rent Allowance (HRA) exemption under Section 10(13A) of the Income Tax Act if they do not receive a salary from an Indian employer that includes an HRA component. Many NRIs earn salary exclusively from foreign employers and do not have an HRA component in their Indian income. Without a salary with HRA from an Indian employer, there is no HRA exemption to claim.

Legal basis: Section 10(13A) of the Income Tax Act, 1961, read with Rule 2A of the Income Tax Rules. The exemption is calculated based on HRA received as part of salary, rent paid, and salary amount. If no Indian salary with HRA exists, the exemption is inapplicable. Additionally, under Section 80GG (deduction for rent paid when HRA is not received), NRIs can claim this deduction only if they do not own any residential property in the city where they reside in India -- which creates a practical limitation.

20B -- Karta of HUF Restriction: The position of Karta (manager) of a Hindu Undivided Family (HUF) is governed by Hindu personal law. Only a Hindu, Sikh, Jain, or Buddhist can be a Karta of an HUF. NRIs who do not belong to these religious communities cannot create or head an HUF, even for tax planning purposes. Additionally, while an NRI of the eligible religion can technically be the Karta of an HUF, managing HUF affairs from abroad creates practical and compliance challenges.

Legal basis: The Hindu Succession Act, 1956, and the concept of HUF under Hindu personal law as recognized by the Income Tax Act under Section 2(31). The Supreme Court in various judgments has held that HUF is a creature of Hindu law and the Karta must be the eldest male (or eldest female member after the 2016 Supreme Court judgment in certain circumstances) of the family belonging to the Hindu, Sikh, Jain, or Buddhist faith.

Penalty for violation: Claiming HRA exemption without a valid HRA component in salary will result in denial of the claim, addition to income, and penalty under Section 270A (underreporting -- 50% penalty). Creating or claiming Karta status of an HUF without being from an eligible religion is void under personal law, and any tax benefits claimed through such an HUF will be denied with penalties.

Summary Table: Quick Reference

#	Restriction	Legal Basis	Key Penalty
1	Agricultural land purchase	FEMA Sec 6(5), FEMA 21(R)	3x amount + confiscation
2	Benami property	Benami Act Sec 3	1-7 years imprisonment + 25% FMV fine
3	Cash sale proceeds	IT Act Sec 269SS/269ST	100% of cash amount
4	Resident savings account	FEMA Deposit Regulations	3x amount (FEMA)
5	Form 15G/15H	IT Act Sec 197A	Prosecution, 6 months-7 years
6	Section 87A rebate	IT Act Sec 87A	Tax demand + 50-200% penalty
7	ITR-1 Sahaj filing	CBDT Notification	Return treated as not filed
8	New PPF account	PPF Scheme 2019, MoF Notification	Account irregular, reduced interest
9	Sovereign Gold Bonds	SGB Scheme, RBI	Subscription void + FEMA penalty
10	SCSS investment	SCSS Scheme 2019	Account closure
11	Intraday/F&O trading	FEMA NDI Rules, SEBI	3x amount + market debarment
12	NRO repatriation > USD 1M	FEMA Remittance Regs	3x excess amount
13	Indian income to foreign account	FEMA Deposit Regs	3x amount + prosecution
14	Remittance without 15CA/15CB	IT Act Sec 195(6), Rule 37BB	INR 1 lakh penalty
15	Resident demat account	SEBI Circulars, FEMA	Account freeze + FEMA penalty
16	Work on tourist visa	Foreigners Act 1946	Deportation + 5 years imprisonment
17	Government employment	Constitution, CCS Rules	Termination + fraud prosecution
18	Postal ballot voting	RPA 1950/1951	Not available (must vote in person)
19	Constitutional positions	Constitution Articles 58, 84 etc.	Disqualification
20	HRA without Indian salary / HUF Karta	IT Act Sec 10(13A), Hindu law	Claim denial + 50% penalty

Frequently Asked Questions (FAQs)

FAQ 1: Can an NRI inherit agricultural land in India?

Yes. While NRIs cannot purchase agricultural land, they can inherit it from a person resident in India or from another NRI who legally acquired it. However, the NRI can only sell inherited agricultural land to a person resident in India -- not to another NRI or foreign citizen. This distinction between acquisition by purchase (prohibited) and acquisition by inheritance (permitted) is clearly established under FEMA 21(R).

FAQ 2: What happens if I do not convert my resident savings account to NRO after becoming an NRI?

You are in violation of FEMA from the moment you become a non-resident. While banks may not proactively detect the change, any transaction conducted through the improperly maintained account can be scrutinized. If discovered during a tax assessment, property transaction, or bank audit, FEMA compounding proceedings can be initiated with penalties of up to three times the balance/transaction amount. It is advisable to inform your bank within a reasonable period of becoming an NRI.

FAQ 3: Can an NRI trade in mutual funds if intraday and F&O are restricted?

Yes, absolutely. The intraday and F&O restriction applies only to direct equity trading on stock exchanges. NRIs can freely invest in mutual funds (equity, debt, hybrid, and index funds) through a KYC-compliant process. Most AMCs accept investments from NRIs, though some fund houses restrict NRIs from the US and Canada due to FATCA compliance costs. Mutual fund investments by NRIs do not require a PIS account.

FAQ 4: Can an NRI repatriate more than USD 1 million if they sell a property?

For property purchased using NRE/FCNR funds, the repatriation of the original investment amount in foreign exchange is not subject to the USD 1 million cap. However, capital gains and any appreciation are subject to the annual limit. For property purchased using NRO funds or inherited property, the USD 1 million per financial year limit applies to the total repatriation from the NRO account. For amounts exceeding this limit, prior RBI approval is required, which is granted on a case-by-case basis through the AD bank.

FAQ 5: Is Section 80C deduction available to NRIs even though Section 87A is not?

Yes. Section 80C deductions (up to INR 1.5 lakh) are available to NRIs under the old tax regime. NRIs can claim deductions for investments in ELSS mutual funds, life insurance premiums, tuition fees for children, home loan principal repayment, and other specified instruments. The restriction is specifically on the Section 87A rebate, not on Chapter VI-A deductions. However, under the new tax regime (Section 115BAC), most deductions including 80C are not available to anyone -- resident or NRI.

FAQ 6: Can an NRI open a PPF account in their minor child's name if the child is a resident?

A PPF account can be opened in the name of a minor by the guardian. If the minor child is a resident of India and the NRI parent is the natural guardian, the account can potentially be opened. However, the NRI parent cannot open a PPF in their own name. The practical challenge is that banks and post offices may scrutinize the guardian's residential status during KYC. It is advisable to have the resident parent (if applicable) act as the guardian for the minor's PPF account.

FAQ 7: What is the penalty if an NRI does intraday trading through a broker who allows it?

Both the NRI and the broker are liable. The NRI faces FEMA penalties of up to three times the amount involved. The broker faces action from SEBI for facilitating unauthorized transactions, which can include suspension of license, monetary penalty, and disgorgement of profits. Any gains from such unauthorized trading can be confiscated, and losses do not get any tax benefit since the transactions are deemed illegal.

FAQ 8: Can an OCI cardholder vote in Indian elections?

No. OCI cardholders cannot register as voters in India and cannot vote in any election (Parliamentary, State Assembly, or Local Body). Only citizens of India can vote. The right to vote under Article 326 of the Constitution and the Representation of the People Act is exclusively for Indian citizens. NRIs who hold Indian passports (and have not acquired foreign citizenship) can register as overseas electors under Section 20A of the RPA, 1950.

FAQ 9: Can an NRI hold a joint account with a resident Indian?

NRIs can hold a joint NRO account with a resident Indian. However, NRIs cannot hold a joint NRE or FCNR account with a resident Indian -- the joint holder must also be an NRI. The resident joint holder of an NRO account can operate the account for local payments, but repatriation (sending money abroad) from the NRO account can only be done by the NRI account holder with proper documentation and within the USD 1 million annual limit.

FAQ 10: What should an NRI do if they discover they have been violating one of these restrictions unknowingly?

Voluntary disclosure and rectification is always the best approach. For FEMA violations, the RBI has a compounding mechanism under Section 15 of FEMA where contraventions can be compounded (settled) by paying a compounding fee, which is significantly lower than the maximum penalty. For income tax violations, filing updated returns (Section 139(8A) allows updated returns up to 24 months from the end of the assessment year) with additional tax can regularize the situation. Consult a qualified Chartered Accountant or FEMA expert immediately to assess the situation, quantify the exposure, and take corrective action before any enforcement action is initiated.

FAQ 11: Are there any states where NRIs can buy agricultural land?

No. The FEMA restriction on NRI purchase of agricultural land is a central regulation that applies uniformly across all states and union territories of India. Individual state land reform laws may have their own additional restrictions, but the FEMA prohibition is overarching and cannot be circumvented by any state-level permission.

FAQ 12: Can an NRI use the LRS (Liberalised Remittance Scheme) to send money from India?

No. The LRS is available only to resident individuals for remitting money abroad (up to USD 250,000 per financial year). NRIs cannot use LRS. NRI remittances from India are governed by separate FEMA provisions -- specifically the NRO repatriation route (up to USD 1 million per year) with Form 15CA/15CB compliance. This is a common point of confusion and getting it wrong can result in FEMA violations.

Key Takeaways

FEMA is the backbone of NRI restrictions in India. Most property, banking, and investment restrictions flow from FEMA and its regulations. The penalty structure of "up to three times the amount involved" makes FEMA violations extremely costly.
Ignorance is not a defence. Many NRIs continue to operate resident accounts, trade intraday, or hold benami properties out of lack of awareness. The law does not distinguish between intentional and unintentional violations.
The Benami Act is the most severe. With criminal prosecution carrying imprisonment of one to seven years and confiscation of property, benami transactions carry the harshest consequences among all the restrictions listed here.
Most restrictions have legal workarounds. Inheritance instead of purchase for agricultural land, Form 13 instead of Form 15G/15H for lower TDS, mutual funds instead of intraday trading -- understanding the legal alternatives is as important as knowing the restrictions.
Voluntary compliance saves money. The RBI compounding mechanism for FEMA violations and the updated return filing option for tax issues provide safety nets for those who self-correct before enforcement action.

Need Expert Guidance on NRI Restrictions and Compliance?

Navigating the complex web of FEMA prohibitions, Income Tax restrictions, and regulatory requirements as an NRI can be challenging. A single misstep can result in penalties that far exceed any benefit you might have gained.

CA Mayank Wadhera and the team at MKW Advisors specialize in NRI taxation, FEMA compliance, and cross-border regulatory advisory. With qualifications spanning CA, CS, CMA, and IBBI Registered Valuer credentials, we bring comprehensive expertise to every client engagement.

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Whether you need to regularize an existing violation, structure a compliant investment, or simply understand what you can and cannot do as an NRI in India, we are here to help.

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Disclaimer: This article is for informational purposes only and does not constitute legal or financial advice. Laws and regulations are subject to change. Readers should consult a qualified professional for advice specific to their situation. The information is current as of March 2026 and applicable for FY 2025-26 (AY 2026-27).