NRI's CORNER
F.E.M.A.
NRI Definition - Fallacies
NRIs CORNER - FALLACIES AS RE: NRI STATUS
 
Fallacies:
 
.01           Citizenship:
Many persons permanently residing in India having adopted foreign citizenship presume themselves to be NRIs on account of their foreign citizenship. Such foreign citizens may be returning NRIs too who after staying abroad would have returned to India for permanent settlement. Now, practically if such NRI returnees are more or less settled in India, they are Residents of India both under the Foreign Exchange Management Act,1999 [FEMA] and depending on the number of days stay in India under the Income-tax Act,1961 [IT Act] too.
Many residents of India also frequently go and stay  abroad intermittently say to be with children & family. In such cases also, if the circumstances show that the person has no business activities outside India and stays most of the part in India or is settled more or less in India then he continues to be Resident Indian. 
 
.02           Green Card: 
Quite a few resident individuals become eligible for Green Card and after taking up overseas rights of residence continue to reside in India. Such Resident Indians may visit USA now & then but they continue their business, profession and permanent residence in India. Such persons presume that as green-card holders they are NRIs and open bank accounts in USA, sometimes make investments in USA and in most of the cases open and operate Non-Resident [E] Rupee [NRE] and Foreign Currency [FCNR] bank accounts in India. Erroneously, in some cases , such persons also don’t pay income-tax in India on interest arising from NRE / FCNR accounts and overseas income which is a serious contravention of ITAct.
Green Card, citizenship and for that reason even partial residence abroad has no relevance at all with the residential status under FEMA as defined earlier. Accordingly, such persons should not  open and operate accounts abroad or make investment abroad nor should they open and operate NRE/FCNR  bank accounts in India designated for NRIs.
 
.03           Residential & Business Permits:
Many NRIs, particularly in the Middle East region, while returning to India for permanent settlement continue to hold business licenses whereas continuation of residential permit is also a common feature for NRIs returning to India for permanent settlement. The presumption is that they are NRIs by virtue of continuation of business licenses and/or residential permit. Such persons also make the mistake of opening and operating NRI bank accounts in India and presuming their entire income to be exempt from income tax in India.
This is also a fallacy and accordingly a breach of law as said persons are residents. 
 
.04           Others:
In some cases, NRIs returning to India on experimental basis are not sure regarding settlement in India The argument put forward in such cases is that such NRIs have not returned to India for permanent settlement. Some others say that they have not been able to make up their mind whether they are to settle in India or return to their country of previous residence..
If the circumstances clearly indicate that the NRI has permanently settled in India by undertaking employment , business or profession in India, he will be treated as Resident Indian. This argument will further find support from the facts of discontinuation of foreign employment, business or profession ; non-retention of permanent abode abroad, giving up residential permits and so on.
 
CONCLUSION:
 
Although some confusion does arise in view of two separate definitions under FEMA, and the IT Act but for all practical and investment purposes it is the definition under FEMA  which should be  the guiding definition applicable to an NRI and also a returning NRI.
More over returning Indians can continue to hold their movable & immovable assets outside India for an indefinite period and also continue FCNR Bank Deposits in India up till maturity & enjoy the benefits  bestowed upon returning Indians but for all practical purposes such persons should accept & act upon their residential status as Residents in India.
 
 
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