We answer the later part of the question first. While it is not mandatory for all NRIs to have a PAN, those who have a source of income in India need to have a PAN to file their income tax return and pay taxes that are due. This income could be in the form of rent, dividends from shares, returns from mutual funds, etc.

Further, an NRI is mandatorily required to possess a PAN card in the following
scenarios:

* If an NRI earns a taxable income in India
* If an NRI wishes to trade in shares, through depository or through broker.
* If an NRI wants to invest in Mutual Funds.

As regards bank account, a Non-Resident Indian should either have NRO account or NRE account to carry on banking transactions in India. If you are planning to save your foreign earnings in India, NRE account is the most preferred option for you. Kindly note that the interest income earned on NRE account balances are tax free. If you wish to save your foreign earnings in foreign currency, you have the option of setting up Foreign Currency Non-Resident Account with a bank of your choice, in a currency of your choice.

This option of holding your foreign earnings in foreign currency insulates you from any exchange fluctuations. While your NRE account would come handy when you remit funds from overseas to your NRE account in India for investment, your NRO account will suffice if you plan to invest your income earned in India to generate further returns. Income arising from the NRO account is taxable. There are no penalties for not having an NRE account. NRO account may also suffice for you to carry on with your banking transactions in India.

However, penalties would certainly apply if you earn income that has a source in India and you miss to file your income tax return(s) annually and pay taxes due within prescribed due dates.

–  CA Dhaval Jasani is the founder and CEO of  ZTI, a boutique advisory firm based in Dubai. He has experience handling assignments across geographies, including but not limited to East Africa, Central Africa, South Africa, West Africa, Europe, UAE and India. He has led fundraising, forensic accounting, arbitration, due diligence, mergers, acquisitions, structures, compliance and techno-economic feasibility studies in his more than two-decade old career.