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NRI, or Non-Resident Indian, is a person who was born in India but now lives abroad. Indians can be classified as a resident of India or non-resident Indians based on their status of residence in the country. The NRI community plays a significant role in the growth of the Indian economy. The tax implications for an NRI need a more precise understanding; thus, this article aims to provide valuable insights into NRI status and NRI taxation.
As per the rule;
Individuals who do not fall under the above mentioned conditions are considered NRI or Non-Resident Indians. Hence, NRI status differs from the citizenship status of people in India.
So, when do you get an NRI status? A person attains the NRI status if they are an Indian citizen but stays in the country for fewer than 182 days during a financial year (preceding FY). Or if a person lives abroad for livelihood such as a job, business, or any other purpose for an indefinite period of time.
The crew working on Indian ships are also included in this category. However, in their case, the minimum duration of 60 days is extended to 182 days by the government. As per the new rule applied since 01.04.2015, the status of residence for such crew members is governed by the following:
As per the above rule, crew members from India who are stationed on foreign ships because of their job/service for 182 days or more are treated as NRIs.
A person with NRI India status enjoys similar rights and benefits as an Indian resident, such as the right to vote, the right to buy land/property anywhere in India, etc.
PIO means Person of Indian Origin. An individual is given a PIO status if they are a citizen of a foreign country but has held an Indian passport earlier by means of:
OCI means Overseas Citizen of India. Individuals can hold the OCI status if they have family ties in India. You may note that people with OCI status do not hold many rights like NRIs or other Indian citizens.
RNOR means Resident but Not Ordinarily Resident.
In all the above situations, the individuals are regarded as RNOR.
The new rules for NRI in India (pertaining to the status of residence) are mentioned by the government. However, there are two laws which need understanding. These are related to India’s Income Tax Act (IT Act) and Foreign Exchange and Management Act (FEMA):
To understand the NRI status in India in detail, some criteria per the demand of the above laws need understanding. NRI, in terms of income tax laws, differs from FEMA laws.
Section 6 of the IT Act states that an individual is an Indian Resident if:
The second condition doesn’t apply to those who are of Indian origin but who live in a foreign nation and visit India occasionally.
It means any income that is accrued in India. Or any income that is deemed by law as accrued in India.
Regardless of the residential status of a person, if the criteria given below are met, the income earned is regarded as ‘accrued in India’ under section 9 of the Indian Income Tax Act:
Here are some amendments made in the 2020 financial bill regarding NRI status that might interest you.
NRIs were given tax relief under the 2021 budget to spare them from double taxation. This has been done by adding a new Section 89A to the Income-tax Act 1961. As per the new section, income from accounts opened in a foreign country is not taxable on an accrual basis. Rather, the tax liability will be there at the time of withdrawal of the money as per the new rule, which came into effect from April 1, 2022.
Every year, a significant number of people from India migrate abroad looking for jobs, business, or study. This brings a considerable inflow of foreign exchange as money transfers or remittances which helps in blooming the GDP in India. NRIs investing money in India allows profitable returns to the country.
There is no penalty for not declaring NRI status.
The full form of NRI is Non-Resident Indian. An Indian-born citizen who emigrated to another country is regarded as an NRI.
It determines if an individual is a Resident, Non-Resident (NRI), Ordinarily Indian Resident (ROR), or Resident but Not Ordinarily Indian Resident (RNOR) by asking some quick questions.
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