NRI's CORNER
F.E.M.A.
NRI Income Tax Definition

NRIs CORNER - NRI Definition under Income Tax

 

NRI DEFINITION  UNDER THE INCOME-TAX ACT,1961 [ IT Act ] :

1.             The second important definition is incorporated in the Income-tax Act of 1961 [ IT Act ] being  wedded to individual's physical stay in India during a financial year beginning from 1st April and ending on the 31st March every year as also in preceding 4 , 7 and 10 years. IT Act lays down that any person including an Indian or Foreign citizen of Indian origin residing outside India will be treated as Non-Resident [Indian] provided :“his stay in India does not exceed 181 days during a financial year commencing on 1st April and ending on 31st March". 

The stay need not be a continuous one as it is the total number of days during a financial year, which are taken into account while arriving at  the residential status and it  is important to note that the day of arrival and the day of departure are both included in number of days of stay in India.

 

.01      Non-Resident :

                                   [i].      An individual  residing abroad is defined as a Non-Resident  in a Financial Year under the IT Act  if  his stay does not exceed 181 days.

                                 [ii].      However for determining residential status of  an NRI returning to India for permanent settlement , for the year of return,  besides the stay not exceeding 181 days an additional condition is applicable that of stay not totaling to 60 days or more in relevant year if his stay in earlier 4 years totaled to 365 days or more.

                                [iii].      A resident of India being Indian citizen leaving India for taking up employment or joining as a crew of an Indian  ship will be treated as a Non-Resident if his stay in India in the year of departure did not exceed 181 days. 

Thus in case of NRIs residing abroad physical stay in India not exceeding  181 days in a financial year  is the only factor that determines their status as Non Resident .

.02           Resident :

An individual is defined as a Resident  in a Financial Year if :

[i].   his stay exceeds 181 days during such year
or               

[ii].   is stay totals to 60 days or more in relevant year in addition to his stay totaling to 365 days or more  in immediately preceding 4 years.

The second condition of 60 days stay does not apply to an NRI visiting India and an Indian citizen leaving India as a crew- member of an Indian ship or for taking up employment abroad.

 

.03     Resident but Not Ordinarily Resident (R but NOR)

A Resident is  further defined as Not Ordinarily Resident provided such individual has been :
a non- resident in  9 out of 10 Financial Years preceding the current year”
or
his stay in India totals to 729 days or less in 7 financial years preceding the current year.

The importance of said definition is substantial as the global income of a returning Indian is not liable to tax in India so long as he is Non-Resident or R but NOR .

 

.04       Resident and Ordinarily Resident (R & OR)

Although this is not a specified definition, but is a popular jargon on account of the taxability of global income in case of a Resident who is not a Not Ordinarily Resident , conversely said to be  Resident and Ordinarily Resident who fulfills the conditions of :

not being a non- resident in  9 out of 10 Financial Years preceding the current year”

AND  

whose stay in India totals to 730 days or more in 7 financial years preceding the current year.

Thus , the global income of a returning Indian is liable to tax in India once he is R and  OR , which will be subject to reliefs and provisions of Double Tax Treaty , if any , between India and the country wherefrom such income arises,

 

.05      An important relief after this criss-cross definitions is that income-tax exemption of interest income earned on Non Resident (E) [NRE] and Foreign Currency Non-Resident   [FCNR] accounts is granted to NRIs covered by the broader definition of an NRI under the previous Foreign Exchange Regulation Act, 1973, [FERA] and not the Income Tax Act,1961.[ IT Act ]

 

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