A Non-resident Indian (NRIs) transacting in cash above the amount of Rs. 50,000 has to be able to submit the original identification documents to the banks and financial institutions along with a copy of the same before it can go through. This has been made mandatory by the Department of Revenue at the Government of India with immediate effect under the Prevention of Money-laundering (Maintenance of Records) Rules.
According to this amendment, the obligation lies with the banks, financial institutions and intermediaries such as stock brokers to verify the identity of clients, maintain records and furnish information to the Financial Intelligence Unit of India (FIU-IND). This means that the reporting entity has to compare the copy of the officially valid identification document produced by the client with the original and record it on the copy. This is done with an eye on curbing money laundering and black money generation. Earlier, the income tax department had ruled all cash transactions above Rs.Two lakhs as illegal.
What Has Changed with the New Rule?
- When a client establishes a relationship with a financial institution like a bank, he has to produce original documents identifying himself and clearly display the intent of the new relationship. For example, when a NRI opens a new bank account.
- The financial institution is the official reporting entity to the Finance Department. It is their responsibility to validate the identification of the account holder and make an official record of the purpose and intended nature of the business relationship.
- This new rule is applicable to stock brokers, chit fund companies, cooperative banks, housing finance institutions and non-banking finance companies. Therefore, if the NRI is dealing with any of these intermediaries, he is required to produce and establish a valid identification and purpose respectively.
- When it comes to foreign currency, any amount of more than Rs. 10, lakhs ($22,500 approx.) transacted in India will have to follow the new procedure.
- Foreign remittances in the form of wire transfers of more than Rs.5 lakhs ($7500 approx.) in foreign currency will also require a valid identification and validation of purpose.
Purchase and sale of immovable property valued at $76,000 or more also falls under this category.
What You Will Need?
- Fill out a Prevention of Money Laundering Act (PMLA) form for every cat transaction over Rs. 50,000;
- Aadhaar number, in the case of Indian residents and the PAN along with passport and visa details in case of NRIs are required for any banking operation as well as for any financial transaction of Rs. 50,000 and above;
- ID containing updated address;
- Proof of having converted a savings account to a NRE or NRO account if the account holder has been out of India for more than 182 days.
- A utility bill like electricity telephone, post-paid mobile phone, piped gas or water bill which is not more than two months old. This will be domestic for a resident and foreign for a NRI ;
- Any other recent valid proof of address;
- Property or municipal tax receipt, if you own property in India;
- Pension or family pension payment orders issued to retired employees by Government departments;
- Letter of allotment of accommodation from employer can also be considered for the same purpose in the case of Indian residents.
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