Bahrain and the Common Reporting Standard
Bahrain signed the CRS Multilateral Competent Authority Agreement on 29 June 2017, committing to
its first automatic exchange of financial account information by September 2018. Under Bahrain's
domestic CRS regulations, Reporting Financial Institutions -- generally banks, custodial institutions,
and certain investment entities operating in Bahrain -- are required to identify account holders' tax
residency through self-certification forms and to report account balances and income annually to
Bahrain's National Bureau for Revenue (NBR), which acts as Bahrain's CRS competent authority and then
exchanges that data with partner jurisdictions' tax authorities. Whether Bahrain's exchange relationship
with India specifically has been formally activated on the OECD's bilateral relationships list was not
independently confirmed for this guide -- given both countries' long-standing CRS participation, an
active relationship is likely, but NRIs should verify this directly against the OECD's published
Automatic Exchange of Information portal rather than assume it applies to their specific account.
Schedule FA and the Black Money Act -- who actually needs to worry
A common misconception among NRIs is that any foreign bank account or asset must be disclosed on an
Indian tax return. Schedule FA disclosure under the Black Money (Undisclosed Foreign Income and Assets)
and Imposition of Tax Act, 2015 applies only to taxpayers classified Resident and Ordinarily Resident
(R&OR) under Section 6 of the Income-tax Act -- not to Non-Residents or even to Resident but Not
Ordinarily Resident (RNOR) taxpayers. A genuine NRI in Bahrain, filing as a non-resident for Indian tax
purposes, has no Schedule FA obligation for Bahrain bank accounts, Bahrain business interests, or other
Bahrain assets, and this remains true even in a year where the NRI happens to visit India for an
extended period, provided their residential status for that year still works out to Non-Resident or
RNOR under the statutory day-count tests. Where the obligation does apply, non-disclosure can attract a
penalty of up to Rs 10 lakh per year of default under Section 43 of the Black Money Act, separate from
any tax demand on undisclosed foreign income itself, which is what makes correctly tracking the year a
person's status actually changes so important.
When the compliance obligation actually starts
The Schedule FA obligation becomes live only if and when the NRI returns to India and, after the
RNOR transition period -- determined by the 2-of-10-years and 729-day tests under Section 6, and
typically lasting two to three financial years for someone returning after a long spell abroad --
crosses into R&OR status. During the RNOR window itself, most foreign income and Schedule FA
disclosure obligations still do not apply, which is precisely why many returning NRIs are caught off
guard once they finally do cross into R&OR status and the obligation begins without warning. From
that point, failing to disclose foreign assets can trigger penalties under the Black Money Act, though a
safe-harbour threshold exists for smaller, non-immovable foreign assets, assessed with reference to an
aggregate value test rather than applying automatically to every small holding. NRIs planning a
permanent return to India should map out their expected RNOR window in advance and plan their Schedule
FA compliance -- including gathering Bahrain bank statements and business records -- around this
transition rather than treating it as an immediate concern while still genuinely non-resident.
