Non-Resident Indian (NRI)

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Non-Resident Indian (NRI) in India is a tax status for a person, who is a citizen of India or of Indian origin, residing abroad.
Non-Resident Indian (NRI) definition

A Non-Resident Indian (NRI) means a person resident outside India who is a citizen of India or is a person of Indian origin. The NRI definition is explained under the Foreign Exchange Management Act, 1999 (FEMA) and the Income Tax Act, 1961.

The reason for residing outside India can be education, employment, vocation and any other acceptable reasons defined under the laws.

While FEMA and Income Tax Act have similarity in the definition of an NRI, they also have differences as well. So, at a time, a person can be an NRI as per the Income Tax Act and not be under FEMA regulations.


NRI Definition as per Indian Income Tax Act

Under section 6 of the Income Tax Act, 1961, a person, who is of Indian origin or Indian citizen, is considered an NRI if he is not a resident in India.

An individual whose total taxable Indian income exceeds ₹15 lakhs is considered to be a resident if the person:

  • visits India for a period of 120 days or more in the previous year and
  • has been in India for 365 days or more in immediately preceding 4 years.

If the total taxable Indian income of a person is up to ₹15 lakhs during the financial year, those individuals will continue to remain NRI if the visit to India does not exceed 181 days.

If the individual qualifies as resident as per the above-mentioned criteria, he would still be treated as ' Resident but ordinarily resident' (RNOR) from taxability perspective and only the Indian income will be taxed. To qualify as RNOR an individual has to be a non-resident in India in 9 out of 10 previous financial years preceding that year.

If the above condition is not met, then the individual will be treated as Ordinarily Resident and the entire income including foreign income will be taxed in India

For more detail please refer to section 6 of the Income Tax Act, 1961 .

Note that the NRI definition has been amended in Finance Bill 2020 (amendment in Section 6) which becomes effective from 1st April 2020.


NRI Definition as per FEMA Act

Under Foreign Exchange Management Act, 1999, an NRI is defined in terms of a person residing outside India and is a citizen of India or a person of Indian origin. The stay outside India can be for an uncertain period due to employment, business, vocation, and any other reason. For more detail please refer to RBI circular No.8/2013-14.

 

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Frequently Asked Questions

  1. 1. Is NRI an Indian citizen?

    An NRI is an Indian citizen residing in a foreign country. NRIs enjoy voting rights and are required to pay and file the income tax return on their Indian income like resident Indians.

    NRI is more of a technical classification for taxation purposes and investment purposes. However, in case an NRI wishes to take up foreign citizenship, he/she will have to give up Indian citizenship as the Indian constitution does not allow dual citizenship. A person cannot hold Indian as well as foreign citizenship simultaneously.

     

  2. 2. Can NRI do trading in India?

    An NRI can do delivery-based trading in India on repatriation or non-repatriation basis. An NRI cannot do short-selling.

    An NRI can invest in the stock market under the Portfolio Investment Scheme (PIS) of the RBI. The PIS approval is mandatory to trade with repatriation benefits and thus requires the NRE PIS bank account to be linked with NRE Demat and NRE trading account to start investing.

    With the recent change in RBI rules, the PIS requirement has been waived for NRO mode of transactions and thus an NRI can start investing without repatriation benefits by linking NRO Non-PIS bank account with NRO Demat and NRO trading account. Though RBI has eased the requirement of PIS for NRO mode, many brokers still insist to trade using the PIS route to avoid the responsibility of TDS calculation complexity and deduction which is difficult to be managed with existing capacity that is currently done by PIS banks.

     


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