NRI
NRIs need to follow FEMA rules once their tax residency status changes from resident Indian to NRI. This article shows how to calculate the residency status based on the amount of time spent inside and outside India.
The income tax website defines an NRI like this:
'Non-resident Indian' is an individual who is a citizen of India or a person of Indian origin and who is not a resident of India. Thus, in order to determine whether an Individual is a non-resident Indian or not, his residential status is required to be determined under Section 6. As per section 6 of the Income-tax Act, an individual is said to be non-resident in India if he is not a resident in India and an individual is deemed to be resident in India in any previous year if he satisfies any of the following conditions:
1. If he is in India for a period of 182 days or more during the previous year; or
2. If he is in India for a period of 60 days or more during the previous year and 365 days or more during 4 years immediately preceding the previous year.
However, in respect of an Indian citizen and a person of Indian origin who visits India during the year, the period of 60 days as mentioned in (2) above shall be substituted with 182 days. The similar concession is provided to the Indian citizen who leaves India in any previous year as a crew member or for the purpose of employment outside India.
The Finance Act, 2020, w.e.f., Assessment Year 2021-22 has amended the above exception to provide that the period of 60 days as mentioned in (2) above shall be substituted with 120 days, if an Indian citizen or a person of Indian origin whose total income, other than income from foreign sources, exceeds Rs. 15 lakhs during the previous year. Income from foreign sources means income which accrues or arises outside India (except income derived from a business controlled in or a profession set up in India).
Note: The Finance Act, 2020 has introduced new section 6(1A) to the Income-tax Act, 1961. The new provision provides that an Indian citizen shall be deemed to be resident in India only if his total income, other than income from foreign sources, exceeds Rs. 15 lakhs during the previous year. For this provision, income from foreign sources means income which accrues or arises outside India (except income derived from a business controlled in or a profession set up in India).
However, such individual shall be deemed to be Indian resident only when he is not liable to tax in any country or jurisdiction by reason of his domicile or residence or any other criteria of similar nature.
Thus, from Assessment Year 2021-22, an Indian Citizen earning total income in excess of Rs. 15 lakhs (other than from foreign sources) shall be deemed to be resident in India if he is not liable to pay tax in any country.
A person shall be deemed to be of Indian origin if he, or either of his parents or any of his grand-parents, was born in undivided India.
We will now break this down further. In each of these cases, the definition of āyearā is the financial year which runs from 1st April to 31st March. This definition is especially helpful since tax-filing has to be done differently for NRIs vs resident Indians and one of the first questions in the ITR forms is regarding the tax-residency status. In all of these cases, both the departure and arrival dates are included to count as the period spent inside India.
If you are in India for more than 182 days in the previous year then you are a resident Indian.
If he is in India for a period of 60 days or more during the previous year and 365 days or more during 4 years immediately preceding the previous year
Assume that today is 1st July 2023. Letās consider the cases:
If any of the two cases above are true then you are a resident Indian.
an Indian citizen shall be deemed to be resident in India only if his total income, other than income from foreign sources, exceeds Rs. 15 lakhs during the previous year
As per Finance Act, 2020, and the new section 6(1A) added to the Income-tax Act 1961, anyone with a total income exceeding ā¹15 lakhs, except income from foreign sources, when they are not paying tax outside India is an Indian resident.
The rule is therefore, as per Case 1, Case 2 or Case 3 above:
Join the Arthgyaan WhatsApp community: You can stay updated on our latest content and learn about our webinars. Our community is fully private so that no one, other than the admin, can see your name or number. Also, we will not spam you.Any one who is not a Resident Indian is an NRI.
To comply with Foreign Exchange Management Act (FEMA) rules, an NRI cannot have a regular savings accounts in India. Therefore, you must convert existing accounts to NRE or NRO accounts. Excess accounts must be closed. This step is important once your status changes from resident Indian to NRI and can be done either online or on your next visit to India.
An NRE account can be opened only once you are an NRI as a fresh account. Old accounts, which existed when you were a resident Indian, will become NRO and not NRE. You can do the NRI check here: Who is an NRI and who is not? Understanding FEMA and NRE/NRO bank accounts.
This account is used to send money to India. The features and uses are:
This account is used for any income and investments in India. The features and uses are: The features and uses are:
It is the NRIās responsibility to update their non-resident status in Banks, mutual funds, demat account and PAN.
Related:
What should NRIs do if your PAN has become inoperative?
This article shows how a single-income middle aged couple with two small children reach their retirement and childrenās goals.
This article shows how a double-income couple with a 2-year old reach their FIRE dream at the age of 50.
This article shows how a double-income couple with a newborn child can invest for their future goals of FIRE and real-estate investment.
This article shows how a young just-married couple can invest for future goals using the Arthgyaan goal-based investing tool.
Did you welcome a bundle of joy in your 40s? This article will discuss ways of planning the childās (and yourās financial future)
This article shows how a very typical salaried couple with one child can invest for future goals using the Arthgyaan goal-based investing tool.
As the market keeps rising to new all-time high figures, how much returns should equity investors expect from their investments running in SIP form.
Published: 17 September 2023
5 MIN READ
As per SEBI rules, mutual fund investors must have nominees in their folios by 1st October 2023 or explicitly opt out. Otherwise they will face restrictions in selling units.
Published: 24 September 2023
2 MIN READ
This article shows a handy ready reckoner for home loan EMI amounts for all tenures and interest rates along with the amount of principal and interest to be paid.
Published: 29 September 2023
1 MIN READ
A quick retirement calculation for a reader query who has a good amount of corpus already saved for retirement.
Published: 27 September 2023
7 MIN READ
1. Email me with any questions.
2. Use our goal-based investing template to prepare a financial plan for yourselfDon't forget to share this article on WhatsApp or Twitter or post this to Facebook.
Discuss this post with us via Facebook or get regular bite-sized updates on Twitter.
More posts...Disclaimer: Content on this site is for educational purpose only and is not financial advice. Nothing on this site should be construed as an offer or recommendation to buy/sell any financial product or service. Please consult a registered investment advisor before making any investments.
This post titled Who is an NRI and who is not? Understanding FEMA and NRE/NRO bank accounts first appeared on 20 Sep 2023 at https://arthgyaan.com
