NRE Account Funds: Why Your ₹79L Transfer Gets Taxed?
An NRI used his NRE account to buy a ₹79 lakh Mumbai flat. The income tax department sent a notice calling the funds 'unexplained'. Here's why NRE money isn't automatically proof-of-source — and what every NRI buyer must do.
An NRI paid ₹79L from a tax-free NRE account — and still got an 'unexplained cash' notice. That's like being fined for paying with your own salary.
Your NRE account funds can still trigger an income tax notice in India
Key Takeaways
Maintain a complete paper trail of foreign earnings — overseas payslips, foreign bank statements, overseas tax return copies, and wire transfer receipts — before remitting large amounts to your NRE account.
Before buying property in India using NRE funds, file a letter of undertaking or source-of-funds declaration with your bank and consult a chartered accountant experienced in NRI taxation to pre-empt any notice.
If you receive a Section 68 notice, respond within the deadline (typically 30 days) with your foreign income proofs; ignoring the notice leads to the entire amount being taxed at 60% plus a 25% surcharge under the Income Tax Act.
An NRI used his NRE account to buy a ₹79 lakh Mumbai flat. The income tax department sent a notice calling the funds 'unexplained'. Here's why NRE money isn't automatically proof-of-source — and what every NRI buyer must do.
Here's what happened: An NRI residing in the US purchased a ₹79 lakh Mumbai property using funds held in his NRE account, which is a rupee account for NRIs holding foreign earnings remitted to India.. The income tax department issued a notice under Section 68 of the Income Tax Act, treating the funds as 'unexplained cash credits' because the source of the NRE deposits was not immediately verifiable from Indian records.. The case highlights a widely misunderstood rule: NRE accounts are tax-exempt on interest income in India, but the underlying foreign income that funded the account can still be scrutinised if supporting documents are missing..
What you should do: Maintain a complete paper trail of foreign earnings — overseas payslips, foreign bank statements, overseas tax return copies, and wire transfer receipts — before remitting large amounts to your NRE account.. Before buying property in India using NRE funds, file a letter of undertaking or source-of-funds declaration with your bank and consult a chartered accountant experienced in NRI taxation to pre-empt any notice.. If you receive a Section 68 notice, respond within the deadline (typically 30 days) with your foreign income proofs; ignoring the notice leads to the entire amount being taxed at 60% plus a 25% surcharge under the Income Tax Act..
Pro tip: Keep copies of your last 3 years of foreign country tax returns or employer certificates alongside every NRE remittance receipt — this single bundle can close most unexplained-income notices instantly.
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- [1]“NRI buys ₹79 lakh Mumbai flat using NRE funds, gets ‘unexplained cash’ tax notice; here's what happened next” mint - money · 16 Aug 2026
This article is reported by GoCredit's Editorial Team based on the source above. GoCredit synthesises, contextualises, and adds India-borrower-relevant analysis. We are not the original publisher.
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