In one of the comments I saw Sundar saying following
“I wanted to mention that All investments for NRIs are governed by definition of FEMA and not Income Tax act. FEMA definition is quite different from IT definition. So far RBI has not brought any clarity on FEMA regarding this.For example if somebody can prove that in the previous year he stayed in India for more than 182 days and then went abroad for a definite period with total intention of coming back, then most probably he is Resident as per FEMA and he can open a PPF account although he is abroad. But I am not an expert on this matter. But I know RBI has not brought forward a single case before Courts till date. Income Tax people do not care for FEMA, they go by their own definition of NRI and only bother about Tax due.
I suppose you had sometimes applied for Mutual funds or PO savings schemes etc. You will always find a small box where you have to tick choices like Resident Individual or NRI or NRO etc. Then you have to provide foreign address for NRIs etc. Have you ever thought this requirement comes not from IT rules but from FEMA rules? If RBI was so severe on FEMA then millions of illiterate Indian workers working in Gulf etc. can be prosecuted as most of them even don’t know what is NRE or NRO etc. They just send money to India and it goes into the system as Residents only. Even Banks don’t know the nitty gritty of FEMA. Basically as long as money keeps flowing from abroad no body cares for FEMA etc.Even RBI does not care it seems. But reverse flow is sensitive as far as RBI is concerned. They are more careful on this.”
Can anyone clarify more on this matter ?