Who is Non Resident Indian / Who is NRI / Define NRI
(as per FEMA and Income Tax Act)
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Non Resident Indian in a layman's language means an Indian who stays abroad. However, as per law it is quite confusing as different Acts give different definitions for the same. Two definitions most popularly used are :
An Indian Citizen who stays abroad for (a) employment/ carrying on business or (b) vacation outside India or (c) stays abroad under circumstances indicating an intention for an uncertain duration of stay abroad is a non-resident. Persons posted in U.N. organizations and officials deputed abroad by Central/ State Government and Public Sector Undertakings on temporary assignments are also treated as non-resident.
Non-resident foreign citizens of Indian Origin are treated on par with non-resident Indian citizens.
Who is a person of Indian Origin? :-
A foreign citizen ( other than a citizen of Pakistan or Bangladesh ) is deemed to be of Indian Origin, if,
A spouse( not being a citizen of Pakistan or Bangladesh ) of an Indian citizen /Indian origin is also treated as a person of Indian origin provided the Bank accounts are opened or investments in shares/securities in India are made by such persons jointly with their NRI spouses.
B. For Investment in immovable properties:
A foreign citizen ( other than a citizen of Pakistan, Bangladesh, Afghanistan, Bhutan, Sri lanka or Nepal ), is deemed to be of Indian origin if,
(i) he held an Indian passport at any time, OR
The laws in this regard are quite complicated as these it does not define who is non resident. Rather these define who is resident and who are not ordinarily resident. Therefore, if a person does not fall in the category of resident or not ordinarily resident, he / she will be non-resident.
Residential status of an individual or HUF or a company is of great importance in Indian Income Tax Act as the liability to pay tax in India does not depend on the nationality or domicile of the Tax payer but on his residential status. Residential Status is determined on the basis of physical presence i.e. the number of days of stay in India in any year. There are three types of status based on the stay in India:-
(c) A company is resident in India if-
A person is non-resident if he is not resident in India.
(3) Resident but not ordinarily resident
An individual or an HUF is treated to be not ordinarily resident in India in any previous year if he or the manager of HUF-
How the residential status of a person is determined :-
Such a person is resident in India if he satisfies the following conditions:
Such person would be non-resident if he does not satisfy condition (a) stated above.
The residential status of such a person is to be determined after looking into the following
The person would be resident in India if he satisfies all the conditions (a) to (c) above.
The person would be resident but not ordinarily resident if he satisfies the condition at (a) but does not satisfy any or either of the conditions at (b) and (c) above.
The person would be non-resident if he does not satisfy the condition at a) above.
Thus condition (a) is of fundamental importance and must be satisfied to be resident in India. Conditions ( b) and (c) only help to qualify that resident status.
For individuals other than those included in category ( I ) or (ii), we have to look into the following four conditions to determine the residential status:
A person would be resident in India if he satisfies any of the conditions at (a) or (b) and both the conditions at (c) and (d) i.e. he either satisfies conditions (a) , (c) and (d) or (b), (c) and (d).
A person would be resident but not ordinarily resident if he satisfies either of the conditions at (a) or (b) and does not satisfy both or either of the conditions at (c) and (d). In other words, if a person satisfies condition (a) or (b) only but does not satisfy either (c) or (d) or both, he would be treated as resident but not ordinarily resident in India.
If a person satisfies neither of the conditions (a) or (b) , he is non-resident.