An Indian abroad is popularly known as Non-Resident Indian (NRI). The NRI status is legally defined under the Foreign Exchange Management Act, 1999 and the Income Tax Act, 1961 for applicability of respective laws.
NON-RESIDENTS UNDER FEMA, 1999
The definition under FEMA is explained in simple terms for individuals hereunder.
- The residential status of a person leaving India shall be determined as under:
If a person leaves India for the purpose of employment, business or for any other purpose that indicates his intention to stay outside India for an uncertain period; then he becomes a non-resident from the day he leaves India for such purpose.
- The residential status of a person returning to India will be determined us under:
If a person comes to India for the purpose of employment, business or for any other purpose that indicates his intention to stay in India for an uncertain period; then he becomes a resident from the day he comes to India for such purpose.
In the definition, requirement of physical stay for a period of 182 days in India is also stated. However, in our opinion, the period of stay does not affect determination of status as explained in (1) and (2) above.
Thus if a person comes as a tourist, or for any purpose (not for employment or business in India), AND, he comes for a fixed or certain period of time he shall continue to be a non-resident.
NRI UNDER THE INCOME TAX ACT, 1961
The term non-resident is negatively defined under section 6 of the Income-tax Act. An individual who is not a resident under the Income-tax Act is a non-resident (generally, termed NRI).
The status of a person as a resident or non-resident depends on his period of stay in India. The period of stay is counted in number of days for each financial year beginning from 1st April to 31st March (known as previous year under the Income-tax Act).
The definition is explained in simple terms as under:
If an individual who satisfies understated both the conditions of Section 6 of the Income-tax Act, then he becomes a non-resident.
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Condition |
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Status |
| 1. |
He is not in India for 182 days or more during the relevant previous year. |
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If yes, then he is a non-resident. (So check the next condition.) |
| 2. |
He is not in India for 60 days or more during the previous year and he is not in India for 365 days or more during the 4 years prior to the previous year. |
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If yes, then he is a non-resident. |
If you are not satisfying above conditions to become non-resident, check whether following assists you to become a non-resident.
| 2. |
In the case of an individual on visit to India or a member of the crew of an Indian ship or a person leaving India for employment outside India, the requirement of stay in India of 60 days in condition 2 above is extended to 182 days |
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Note:
An Indian citizen who is a crewmember of an Indian Ship or an Indian citizen leaving India for employment is a non-resident in that year if he is in India for less than 182 days in the year in which he leaves.
Non-resident individual who is an Indian citizen or a person of Indian origin who is on visit to India remains Non-resident for that year if he is in India for less than 182 days.
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An individual who is not becoming a non-resident as per the above provisions, there are provisions under section 6(6) of the Income-tax Act under which a special status of RESIDENT BUT NOT ORDINARILY RESIDENT (RNOR) is available to such individual, if he satisfies one of the following conditions:
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Condition |
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Status |
| 1. |
He is non - resident, as per the above provisions, for at least 9 out of 10 previous years prior to the previous year under consideration. |
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If yes, he is RNOR |
| 2. |
His stay in India during the 7 previous years prior to the previous year under consideration should be 729 days or less. |
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If yes, he is RNOR. |
Note:
The status of RNOR renders certain income of such individual non-taxable.
A person may be resident under the Income Tax Act and non-resident under FEMA or vice-versa. The criteria for deciding residential status are different under both the Acts.
This information provided is general and requires proper guidance and advise before it is acted upon as certain provisions in case of complex facts are not explained here.
