What does FEMA mean when my bank asks about it?
FEMA is India’s exchange-control law. It sits alongside the income tax act and answers a different question: not how much tax you owe, but which accounts you may hold, what may be credited to them, and whether money may lawfully leave the country. A bank asking about FEMA is asking about your residential status under that law, which it has to record before it can decide what your account is allowed to do. The answer can differ from the status on your tax return, because the two laws define residence on different tests. Treat it as a separate question with its own evidence rather than repeating what your return says.
Can I be resident under FEMA but non-resident for Indian tax?
Yes, and the reverse happens just as often. Indian tax residence turns on days of physical presence. Exchange-control residence turns on why you went and how long you intend to stay, so someone leaving for employment or for an indefinite period is looked at differently from someone on a fixed short trip, even where the day counts are similar. The consequence is practical rather than theoretical: one law decides which return you file and what is taxed, the other decides which account your money may sit in and whether it may leave India. Where the two point in different directions, the position is written down with its evidence before a bank or an assessing officer asks for it.
Do I need to change my Indian bank accounts after moving abroad?
Usually, yes. A resident savings account is not the right container for a person the exchange-control law treats as living outside India, and banks act on status rather than on convenience. The usual step is redesignation of the existing account rather than opening something new, which keeps the account history intact. Leaving it undone is rarely noticed immediately. It is noticed later, when a remittance is requested and the bank looks at how the balance was built up. Sorting the account structure at the point of departure is far cheaper than reconstructing years of credits afterwards to explain what each one was.
Does FEMA decide how much Indian tax I pay?
No. FEMA governs the holding and movement of money. The income tax act governs what is taxable and at what rate. The two interact, because the account a receipt lands in often determines both the deduction made at source and whether the money can later be sent abroad, but neither law is a substitute for the other. Satisfying the tax position does not release a transfer, and a bank willing to remit has not decided your tax. Files go wrong when one clearance is taken as the other. We deal with them as two questions asked of the same set of facts.
Why has my bank held up a transfer out of India?
Almost always because the paperwork does not yet show, on its face, that the money is of a kind permitted to leave and that the tax position on it has been dealt with. The bank is not adjudicating your affairs. It is checking that a defensible file exists. The fix is documentary rather than argumentative: establish which account the funds sit in, how they got there, and what has already been withheld or paid. Once the chain from source to balance is shown in order, the remittance becomes a routine step. Pressing the entitlement without that chain simply extends the hold.
I have returned to India — what happens to my accounts?
Status changes again, and the accounts have to follow it. Non-resident accounts exist for a person living outside India, and running them on after you return leaves the bank holding an account its own records say is wrong. There is also a category of account intended for someone who has come back and still holds foreign currency, which is worth asking about before anything is converted. The awkward part is the year of return itself, when part of it sits under one status and part under the other. We fix the date of return against the evidence first, then work outward to the accounts, to the holdings abroad and to the return for that year.
What counts as foreign income, and what is a foreign tax?
Foreign income is income sourced outside the country you are filing in — where the work was done, where the property sits, where the payer is resident, depending on the type. A foreign tax, for credit purposes, is a levy imposed by another country that functions as an income tax and that you were legally required to pay. Consumption taxes, property taxes and most social contributions are not, however real the cost. Sourcing is decided by rule, not by which bank received it. See the foreign tax credit.
How do I actually stop being taxed twice?
In this order. Fix your residence under each country's own rules, and if both claim you, apply the treaty tie-breaker. Identify where each type of income is sourced. Read the article that covers that income type, because it decides who taxes and at what maximum rate. Then claim the relief on the residence-country return, with proof of the foreign tax. Most of the tax people lose to double taxation is lost at the last step, not the first. See how double taxation is relieved.
