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Who is NRI – New Definition & Scenarios 2021

By Hemant Beniwal

Why Financial Planning?

Planning is bringing the future into the present so that you can do something about it NOW.

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Check Financial Plan For NRIs
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The Indian expat community (i.e. Indians who live abroad or NRIs) is a very big one. They might be working abroad, studying in a foreign university, or running a business outside of India. Many Indians settle abroad post-retirement.

There have been some changes in the Income Tax Act for NRIs which have left many NRIs somewhat confused that who is NRI. We attempt to explain the changes and their effects in this article.

What Has Changed After The Latest Announcement On The Status Of An NRI?

Who is NRI?

For this first let us look at the definition of a resident as per the Foreign Exchange Management Act (FEMA)

A person who resides in India for more than 182 days in the current financial year and

  • does not work outside of India, does not conduct business outside of India nor remains outside India for an uncertain period for any other purpose.
  • does not fulfill the condition that they stay in India or have come to India for employment, business, or any other such purpose which makes the number of days of stay uncertain.

A person who DOES NOT satisfy these conditions is treated as an NRI (Non-Resident Indian) by the FEMA Act.

Who is OCI?

An individual is considered an Overseas Citizen of India (OCI) if –

  • They are adults and satisfy one of the following conditions –
    • They became a citizen of India on or after 26 Jan 1950
    • They were eligible to become a citizen of India on 26 Jan 1950
    • They belonged to a territory that became part of India after 15 Aug 1947
    • They are a child or a grandchild or a great-grandchild of such a citizen
  • A minor who is a child of an Overseas Citizen of India as per the conditions above is also considered an OCI
  • A minor who has either parent as a citizen of India or both parents as citizens of India
  • A person of foreign origin who has married a citizen of India or the spouse of an OCI Cardholder who is of foreign origin provided the marriage is registered and is existent for a continuous period of not less than two years. This is not applicable to persons who are or have been citizens of Bangladesh or Pakistan.

You have to consider the conditions mentioned above to decide on how you are going to undertake your banking activities and investments.

For example, if your status is ‘Non-Resident Indian’ based on the criteria above, and you want to invest in shares, you would need to open a Demat account under the Portfolio Investment Scheme (PIS) and not just the usual Demat account.

If you are classified as an NRI or OCI as per the definitions above, you cannot open a new PPF account.

There have been some amendments in the Income Tax Act about the taxation of income of NRIs.

Who is NRI – Income Tax Act

Who doesn’t fall under these definitions are NRIs.

Indian Income below 15 Lakh

“An individual is a resident in India if he is in India for a period of : 182 days or more during the previous year.” 

Indian Income above 15 Lakh

who is NRI

Who am I?

Let us look at the basics first. There are four status applicable to individuals –

The status Resident and Resident Ordinarily Resident (R& OR) are applicable to residents.

Resident & Not Ordinarily Resident (RNOR) and NRI apply to NRIs or NRIs who have recently returned to India.

We will look at Resident & Not Ordinarily Resident (RNOR) and NRI in more detail.

Who is Non Resident Indian

There are multiple scenarios to be considered –

Scenario 1

An Indian Citizen or Person of Indian Origin (PIO) who is outside India, comes to India to visit and has his gross income (In India and abroad) from a business controlled or a profession set up in India NOT exceeding Rs. 15,00,000 during the previous year.

The individual is considered as a resident in India if they are in India for

182 days or more during the previous year.

They will have to file income tax returns as a resident Indian.

Scenario 2

An Indian Citizen or Person of Indian Origin (PIO) who is outside India, comes to India to visit and has his gross income (In India and abroad) from a business controlled or a profession set up in India exceeding Rs. 15,00,000 during the previous year.

The individual is considered as a resident in India if they are in India for

182 days or more during the previous year. OR

120 days or more during the previous year and 365 days or more during the four years preceding that previous year.

They will have to file income tax returns as a resident Indian.

The individual is deemed to be a Resident but not Ordinarily Resident (R but not OR) in India if they are in India for a period of

More than 120 days but less than 182 days during the previous year AND 365 days or more during the four years preceding that previous year.

Scenario 3

An Indian Citizen who leaves India for employment abroad or leaves India as a member of the crew of an Indian Ship.

This person will be considered as a resident if they are in India for a period of 182 days or more during the previous year.

Scenario 4

An Indian citizen who is in India for a period of 182 days or more during the previous year OR

for 60 days or more during the previous year AND 365 days or more during the

four years preceding that previous year is considered as a resident if they DO NOT satisfy the following conditions –

  • Leaves India for employment abroad or
  • Leaves India as a member of the crew of an Indian ship or
  • As an Indian Citizen or as a Person of Indian Origin (PIO), resides in India and comes on a visit to India.

This can be applicable to Indians who have retired abroad

Scenario 5

Individuals satisfying the following conditions shall be deemed to be Resident but not Ordinarily Resident (R but not OR) in India.

  • The person is a citizen of India and was an NRI for 9 out of the last 10 financial years. The person has stayed in India for less than or equal to 729 days in the 7 financial years preceding the current year.
  • The person is not liable to tax in any jurisdiction/country for any reason
  • The person has income in India and abroad from a business controlled or a profession set up in India exceeding Rs. 15,00,000 during the previous year.

There has been an exception for the financial year 2019-20 because of the COVID-19 pandemic

The time that an individual spent in India between 22 March 2020 and 31 March 2020 (or the date on which they left India before 31 March 2020) will not be taken into account when determining their tax residency. If an individual was quarantined on or after 1 March 2020, such a quarantine period (until 31 March 2020) will not count when determining their tax residency.

Some common questions

  • I am an NRI who wants to buy a flat in a cooperative housing society in Delhi. What tax matters should I be aware of?
  • I have been living with my family in the UAE for the last five years. I have a business in the UAE. I spend around one month in India on a yearly basis. Should I pay tax in India on my business income in UAE? READ – Is It a Good Idea To retire in Dubai?

It is important to know your residency status for financial matters such as banking, investing, and filing IT returns.

If you have any questions regarding your NRI status – add in the comment section.

What Has Changed After The Latest Announcement On The Status Of An NRI?
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Hemant Beniwal


Hemant Beniwal is a CERTIFIED FINANCIAL PLANNER and his Company Ark Primary Advisors Pvt Ltd is registered as an Investment Adviser with SEBI. Hemant is also a member of the Financial Planning Association, U.S.A and registered as a life planner with Kinder Institute of Life Planning, U.S.A. He started his Financial Planning Practice in 2009 & is among the first generation of financial planners in India. He also authored Bestseller book "Financial Life Planning". 

  • Hi Hemant,
    I came to work outside India (NL) in Sep 14, 2019. I went back to India for 15 days in Nov 2019 to bring my family. I continue to work in NL.
    What will be my status as per Income Tax department of India?
    Note: I was on a holiday outside India for 15 days in April 2019, not sure if that’s relevant.

    Regards
    PS Dash

  • Hi
    I have a query.NRIs are not allowed to submit form 15G. For 15G submission, we should consider NRI status as per FEMA or Income Tax.

  • I came to NL on Sep14, 2019 to join my job here. I went back to India to bring my family (24 Oct 2019 – 15 Nov 2019). What will be my status for Income Tax dept India? Note: I was on holiday in Singapore for 15 days in April 2019, not sure if that matters. Regards

  • I am NRI for the last 25 years and work outside. On 25th February 2020 I went on vacation to India and stuck up in India due to lockdown and no commercial flights were not operating. I left India on 18th Sept 2020. My job will be terminated on 31st December 2020 and go back to India on 15th January 2021. My question a) what will be the status for FY 2020-21 NRI? b) if I continue to stay abroad till 31st March 2021. I will be considered as NRI?

  • I came to India in end March and got stuck till early September due to lockdown. How will this be treated in calculating residency? What will be the number of days required to be outside India in this year? Will it be proportionately reduced from 182 days?

  • Currently I am NRI and plan to return in two months .I stayed more than 10 years abroad.When I return what happens to my NRE FDs. Does it become taxable? I will be RNOR for two FY atleast.

  • I was abroad during the current financial year from 01 April 2020 to 30 October 2020. What would be my Status in India. I am confused by the 240 days test. I do not have any resident income exceeding 15 lacs. I did not visit India during the Financial Year 19-20 i.e., 01 April 2019 to 31 March 2020.

  • For 19-20 taxation purposes, my query is, from April to mid-June 2019, I was an India employee and since June I am in UK and UK employee. Will my income be global taxable in India. I have already paid my taxes in the UK.

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