Rule 240 Indicia explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
The rule 240 indicia search under the Income-tax Rules, 2026 tests six markers of foreign residence in electronic records, with an enhanced paper and relationship-manager review above USD 1 million, and requires a self-certification at opening for every new individual account.
The four populations the rule 240 indicia search covers
Rule 240 divides every account into one of four populations by when it was opened and who holds it, and applies a different procedure to each. The 1962 parallel is rule 114H. This article deals with the two individual populations; entity accounts and the aggregation rules are dealt with separately.
| Term | Meaning under rule 240(2) |
|---|---|
| Pre-existing account | Maintained as on 30 June 2014 (U.S.) or 31 December 2015 (other) — or 31 December 2025 where it is a financial account only by virtue of the CRS amendments |
| New account | Opened on or after 1 July 2014 (U.S.) or 1 January 2016 (other) — or 1 January 2026 for the CRS-amendment accounts |
| High value account | A pre-existing individual account exceeding the equivalent of USD 1 million as on 30 June 2014 or 31 December 2015 respectively, or any subsequent 31 December |
| Lower value account | A pre-existing individual account exceeding USD 50,000 but not USD 1 million as on 30 June 2014 (U.S.); or not exceeding USD 1 million as on 31 December 2015 (other) |
Most of the dates in rule 240(2) are carried forward from the 2014 FATCA and 2016 CRS start. Two are new, and they are the ones a bank has to act on now: an account that becomes a financial account solely by virtue of the amendments to the Common Reporting Standard — principally accounts holding specified electronic money products and central bank digital currencies — is pre-existing if held at 31 December 2025 and new if opened on or after 1 January 2026. That population has its own cut-over, a decade after the original one, and it is easy to miss inside a data model built for 2016.
Which pre-existing individual accounts need no review
Sub-rule (3)(a): a pre-existing individual account is not required to be reviewed, identified or reported where, for a U.S. reportable account:
- the balance does not exceed USD 50,000 as on 30 June 2014; or
- it is a cash value insurance or annuity contract not exceeding USD 250,000 as on that date; or
- it is such a contract which the institution is legally prevented from selling to a U.S. resident;
and, for other reportable accounts, where it is a cash value insurance or annuity contract the institution is legally prevented from selling to a person not resident in India. Note that the USD 50,000 and USD 250,000 de minimis thresholds exist only on the U.S. side; CRS has no equivalent for individual accounts.
The six rule 240 indicia
For a lower value account, sub-rule (3)(b)(i) requires an electronic search of the institution's searchable data for any of these rule 240 indicia:
| Item | Indicium |
|---|---|
| (A) | Identification of the holder as a resident of a foreign country for tax purposes, or an unambiguous indication of a place of birth in the United States |
| (B) | A current mailing or residence address abroad, including a post office box |
| (C) | One or more foreign telephone numbers and no Indian telephone number |
| (D) | Standing instructions to transfer funds to an account abroad — for CRS, other than a depository account |
| (E) | A currently effective power of attorney or signatory authority granted to a person with a foreign address |
| (F) | A hold mail instruction or in-care-of address abroad, where the institution has no other address on file |
The consequences follow directly:
- No indicium found — no further action until a change in circumstances produces one, or the account becomes a high value account.
- Any of (A) to (E) found — treat the holder as resident for tax purposes of each country for which an indicium is identified, unless the institution elects to apply the cure procedures.
- Only (F) found — apply the paper record search, or seek a self-certification or documentary evidence; if both fail, report the account as an undocumented account.
Five of the six rule 240 indicia point somewhere — they name a country, and the account is treated as reportable to it. Item (F) does not: a hold mail instruction or an in-care-of address with no other address tells the institution the holder is somewhere else without saying where. That is why it alone triggers the fallback in sub-clause (iv), and why, if the paper search and the request for documentation both fail, the account is reported as undocumented rather than to any jurisdiction. Undocumented status is also the one condition under which the enhanced review must be re-applied annually.
Curing one of the rule 240 indicia
Sub-rule (3)(b)(v) lets an institution avoid treating a holder as foreign resident despite an indicium, on stated documentation:
| Indicium | Cure |
|---|---|
| U.S. place of birth | A self-certification that the holder is neither a U.S. citizen nor a U.S. tax resident; a passport or other Government identification showing another nationality; and a certificate of loss of nationality or a reasonable explanation of why there is none despite relinquishment, or why U.S. citizenship was not acquired at birth |
| Foreign address, foreign-only telephone, or standing instructions | A self-certification of tax residences not including any foreign country, and documentary evidence establishing non-reportable status |
| Power of attorney abroad, or a foreign telephone alongside an Indian one | A self-certification of tax residences not including any foreign country, or documentary evidence of non-reportable status |
Note the difference in the connectors. The U.S. place-of-birth cure needs three documents; the address and standing-instruction cure needs a self-certification and documentary evidence; the power-of-attorney cure needs either. Documentary evidence is defined in sub-rule (2)(a) as a Government certificate of residence, a Government identification for an individual, official documentation for an entity, or a financial statement, third-party credit report, bankruptcy filing or securities regulator report.
High value accounts — enhanced review beyond the rule 240 indicia
Sub-rule (3)(c) adds three layers on top of the electronic search:
- a paper record search of the current customer master file and, where not contained in it, five categories of document obtained in the last five years — the most recent documentary evidence, the most recent account opening contract, the most recent PMLA documentation, current powers of attorney or signature authority forms, and current standing instructions to transfer funds;
- an exemption from that paper search where the electronic data already includes six specified fields — tax residence status, residence and mailing address, telephone numbers, standing instructions for non-depository accounts, in-care-of or hold mail status, and any power of attorney or signatory authority; and
- a relationship manager inquiry: an account assigned to a relationship manager, and any accounts aggregated with it, is reportable if the relationship manager has actual knowledge that the holder is a reportable person.
Sub-clause (iii) of sub-rule (3)(c) is worth reading as an instruction to the systems team rather than to the compliance team. If the institution's electronically searchable data carries all six listed fields, the paper record search is not required at all — no customer master file review, no trawl through five years of account opening documents. The cost of capturing those six fields once is far below the cost of a manual file review across a high value book, and it is the single highest-return investment in a rule 240 indicia programme.
Note also that the relationship manager inquiry survives everything. Sub-clause (vii) provides that once the enhanced review has been applied, it need not be re-applied in later years — except the relationship manager inquiry, and except where the account is undocumented, in which case the whole procedure is re-applied annually.
Sub-clause (vi) handles an account that becomes high value: the enhanced review must be completed within the calendar year following the year it crosses the threshold. Sub-clause (ix) requires procedures ensuring a relationship manager identifies any change in circumstances — and a new foreign mailing address notified to him is a change in circumstances.
Sub-rule (3)(e): once identified as reportable, a pre-existing individual account stays reportable in all subsequent years unless the holder ceases to be resident of the foreign country under its tax laws.
New individual accounts and the rule 240 indicia
Sub-rule (4) is much shorter, because the institution controls the moment of opening:
- (a) Unless it elects otherwise, a depository account or a cash value insurance contract is not reviewed or reported as a U.S. reportable account unless the balance or cash value exceeds USD 50,000 equivalent at the end of any calendar year.
- (b) Otherwise the institution shall obtain a self-certification — which may be part of the account opening documentation — allowing it to determine the holder's tax residences, and confirm its reasonableness against the information obtained on opening, including PMLA documentation. For a U.S. account this is due on opening or within ninety days of the year end in which the account leaves the clause (a) exemption; for a CRS account it is due on opening.
- (c) Where the self-certification shows foreign tax residence, the account is reportable, and the self-certification must also carry the TIN, subject to rule 239(5), and the date of birth.
- (d) On a change in circumstances making the institution know or have reason to know the self-certification is incorrect or unreliable, it may not rely on it and must obtain a valid one; failing that, the account is reportable for each country for which an indicium is identified.
Sub-rule (7)(a)(II) supplies the exception for the case where a self-certification simply cannot be obtained in time for a new CRS account: the institution applies the pre-existing account procedures to it until a valid self-certification is obtained and validated.
Worked example
| Facts | Position under rule 240 |
|---|---|
| Pre-existing U.S. account of USD 40,000 at 30 June 2014 | No review required |
| Pre-existing CRS account of USD 40,000 | Reviewable — no de minimis on the CRS side |
| Electronic search finds a Singapore address only | Treat as Singapore tax resident unless cured |
| Only a hold mail instruction, no other address | Paper search or documentation; failing both, undocumented |
| U.S. place of birth; self-certification and foreign passport obtained | Not cured — the third document is also required |
| Power of attorney held by a person in Dubai | Cured by a self-certification or documentary evidence |
| High value account; all six fields electronically searchable | No paper record search |
| Relationship manager knows the holder is a German resident | Account is reportable regardless of the searches |
| Enhanced review done in 2026; account is documented | Not re-applied, except the relationship manager inquiry |
| Account crosses USD 1 million on 31 December | Enhanced review within the following calendar year |
| New CRS account opened with no self-certification | Apply the pre-existing procedures until one is obtained |
| Holder later becomes non-resident of the reported country | The account ceases to be reportable |
Compliance checklist
- Segment the book into the four populations, including the new 31 December 2025 cut-over for e-money and CBDC accounts.
- Apply the USD 50,000 and USD 250,000 de minimis only to U.S. accounts.
- Search for all six rule 240 indicia, and treat item (F) separately.
- Capture the six electronic fields that remove the paper record search.
- Match the cure documentation to the indicium — three documents for a U.S. place of birth.
- Build a relationship manager knowledge and change-of-circumstance process; it never lapses.
- Re-run the enhanced review annually only for undocumented accounts.
- Obtain the self-certification at opening for every new account, with TIN and date of birth.
Common mistakes
- Applying the U.S. de minimis to CRS accounts.
- Reporting a hold mail account to a jurisdiction rather than as undocumented, when it is the one rule 240 indicia item that names no country.
- Curing a U.S. place of birth on two documents.
- Treating the enhanced review as one-off for an undocumented account.
- Ignoring what the relationship manager actually knows.
- Opening a CRS account without a self-certification and not applying the pre-existing procedures.
Which year this governs
The Income-tax Rules, 2026 are made under the Income-tax Act, 2025. The 1962 parallel to rule 240 is rule 114H, given for tracing only. The rule 240 indicia procedures carry the 2014 and 2016 implementation dates forward and add the 2025-26 CRS-amendment cut-over. Verify the current text before designing a review programme.
Key Facts About Rule 240 Indicia
- Applies in: All states across India, under the relevant central law.
- Mode: Mostly online via the official government portal.
- Typical timeline: Ranges from a few days to a few weeks depending on the case.
- Non-compliance: May attract penalties, interest or late fees.
- Expert help: TaxClue completes the entire process end to end for you.
What is a high value account?
A pre-existing individual account with a balance or value exceeding the equivalent of USD 1 million as on 30 June 2014 or any subsequent 31 December for a U.S. reportable account, or as on 31 December 2015 or any subsequent 31 December for other reportable accounts.
What are the six indicia?
Identification as a resident of a foreign country for tax purposes or an unambiguous indication of a U.S. place of birth; a foreign mailing or residence address including a post office box; one or more foreign telephone numbers and none in India; standing instructions to transfer funds to a foreign account; a currently effective power of attorney or signatory authority granted to a person with a foreign address; and a hold mail instruction or in-care-of address abroad where no other address is on file.
Over 90% of compliance penalties in India arise from missed due dates — timely handling can save businesses thousands of rupees each year.
Rule 240 Indicia: a key compliance topic in Indian tax and corporate law that businesses and individuals must understand to remain compliant.