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Indian citizens living in Gulf countries as non-residents can generally retain their locally earned salaries, business income and savings abroad without having to transfer or use the funds within 180 days.

The rule applies to foreign exchange acquired by people who are resident in India and is governed by the Foreign Exchange Management Act (FEMA). It does not automatically extend to Indians who qualify as non-residents.

Some international banks are reviewing credit card arrangements linked to offshore accounts held by wealthy resident Indians, according to the Economic Times, as reported by Gulf News. The concern relates to how funds remitted overseas by Indian residents are held and used.

Who is covered by the 180-day rule?

Under the Liberalised Remittance Scheme (LRS), resident individuals, including minors, can remit up to USD 250,000 per financial year for permitted purposes, including overseas education, medical treatment, travel, property purchases and eligible investments.

Unused foreign exchange acquired under the scheme generally has to be repatriated or surrendered within 180 days, unless it is used or reinvested in line with applicable regulations.

Gulf salaries and savings remain separate

An Indian citizen who qualifies as resident outside India under FEMA does not turn their salary earned in a Gulf country into an LRS remittance simply by holding an Indian passport.

Gulf-based NRIs can generally retain their locally earned income and savings in accounts in their country of residence. The applicable rules depend on their FEMA residential status rather than nationality.

The reported credit-card concerns relate specifically to offshore accounts held by some resident Indians and should not be interpreted as a restriction on banking services for all Gulf-based NRIs.

NRO remittances have separate limits

NRIs with income or assets in India may use Non-Resident Ordinary (NRO) accounts. Eligible funds can generally be remitted overseas up to USD 1 million per financial year, subject to applicable taxes, documentation and other conditions.

The NRO repatriation facility is separate from the USD 250,000 LRS limit for residents.

What happens when an NRI returns to India?

An NRI who moves back to India must reassess their FEMA residential status. NRE and NRO accounts then have to be handled under the applicable RBI requirements.

Foreign assets legally acquired during the non-resident period can receive separate treatment. However, foreign exchange acquired or remitted after becoming resident would be governed by the rules applicable to residents.