Who is a NRI?

The meaning of NRI as defined by the FEMA and the Income Tax Act are not the same. The expression of NRI under the FEMA is relevant for the investment of funds in India, whereas the expression under the Income Tax Act has relevance as it is the key enactment governing the levy and assessment of income tax in India.

As per FEMA:

Person resident outside India : - means a person who is not resident in India;

"Person resident in India" means-

1. A person residing in India for more than one hundred and eighty-two days during the course of the preceding financial year but does not include-
   
   
• A person who has gone out of India or who stays outside India, in either case-
  
  
1. for or on taking up employment outside India, or
2. for carrying on outside India a business or vocation outside India, or
3. for any other purpose, in such circumstances as would indicate his intention to stay outside India for an uncertain period;
   
   
• A person who has come to check in India, in either case, otherwise than-
  
  
2. A person who has come to check in India, in either case, otherwise than-
3. Any person or body corporate registered or incorporated in India
4. An office, branch or agency in India owned or controlled by a person resident outside India,
5. An office, branch or agency outside India owned or controlled by a person resident in India;
   

As per Income Tax:

Section 2 of the Income Tax Act does not define 'NRI'. However, for Chapter XIIA, Non Resident Indian has been defined as an individual being a citizen of India or a person of Indian origin who is not a resident. A person is considered to be of Indian Origin if he or either of his parents or his grand parents was born in undivided India.

Basis of Tax Liability in India:

The tax liability of a person under the Income Tax Act depends on the residential status in the financial year (1st April to 31st March) in which the income accrues or arises to him or is received by him.

For income tax purposes the residential status of an individual generally depends on his physical presence or stay in India and not on his nationality or domicile.

(1) Resident:
An individual is said to be a 'resident' in India in any financial year if he has been in India during that year:

For a period of 182 days or more; or

For a period of 60 days or more and has also been in India within the preceding four years for a period or periods of 365 days or more;

However, the period of 60 days is increased to 182 days in the case of:

A citizen of India or person of Indian origin who has been outside India and comes on a visit;

When a citizen of India leaves India for purpose of employment outside India or as a member of a crew of an Indian ship.

(2) Resident But not Ordinarily Resident
An individual is said to be 'not ordinarily resident' in any financial year, if:

He has not been resident in India in nine out of ten financial years preceding that financial year; or

Has not during the seven financial years preceding that year, been in India for a period of periods of 730 days or more.

An individual would be "not ordinarily resident" if he fulfills either of the above conditions.

A Hindu Undivided Family is said to be 'not ordinarily resident' in India if its manager is 'not ordinarily resident' in India. For calculating the length of the manager's stay in India, periods of stay in India of successive managers of a Hindu Undivided Family have to be added up.

The status of 'resident but not ordinarily resident' is available only to individuals and Hindu Undivided Families.

(3) Non Resident:
A person who is not resident in India is a 'Non Resident'.

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