Who is a non-resident Indian ( NRI )
An Indian Citizen who stays abroad for employment/ carrying on business or vacation outside India or stays abroad under circumstances indicating an intention for an uncertain duration of stay abroad is a non-resident. ( persons posted in U.N. organisations and officials deputed abroad by Central/ State Government and Public Sector Undertakings on temporary assignments are also treated as non-resident) Non-resident foreign citizens of Indian Origin are treated on par with non-resident indian citizens.
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Who is a person of Indian Origin
A
For the purpose of availing of the facilities of opening and maintenance of bank accounts and investments in shares/ securities in India:
A foreign citizen ( other than a citizen of Pakistan or Bangladesh ) is deemed to be of Indian Origin, if,
(i) he, at any time, held an Indian passport,
(ii) he or either of his parents or any of his grand parents was a citizen of India bu virtue of the
Constitution of India or Citizenship Act, 1956( 57 of 1955)
Note: A spouse ( not being a citizen of Pakistan or Bangladesh ) of an Indian Citizen or of a person of Indian Origin is also treated as a person of Indian origin for the above purpose.
B. For Investment in immovable properties:
A foreign citizen ( other than a citizen of Pakistan, Bangladesh, Afghanistan, Bhutan, Sri lanka or Nepal ), is deemed to be of Indian origin if,
(i) he held an Indian passport at any time, OR
(ii) he or his father or paternal grand-father was a citizen of India by virtue of the Constitution of India or
the Citizenship Act, 1955 ( 57 of 1955).
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What is an Overseas Corporate Bodies ( OCB )
Overseas Corporate Bodies predominantly owned by Individuals of Indian Nationality and origin resident outside India (OCBs) include overseas Companies, partnership firms, societies and other corporate bodies which are owned, directly or indirectly to the extent of atleast 60% by individuals of Indian Nationality or Indian Origin resident outside India as also overseas trusts in which atleast 60% of the beneficial interest is irrevocably held by such persons. Such ownership interest should be actually held by them and not in the capacity as nominees.
The various facilities granted to NRIs are also available with certain exceptions to OCBs as long as the ownership/Beneficial interest held in them by NRIs continues to be at or above the level of 60%.
In order to establish that the ownership/beneficial interest in any OCB held by NRIs is not less than 60%, the concerned corporate body/trust is required to furnish a certificate from an overseas Auditor/Chartered Accountant/Certified Public accountant in form OAC, where ownership/beneficial interest is directly held by NRIs, and in form OAC-1 where it is held indirectly by NRIs.
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Non-Resident under Income Tax Act, 1961
Liability to pay tax in India does not depend
on the nationality or domicile of the Tax payer but on his
residential status.
Residential Status is determined on the basis
of physical presence i.e. the number of days of stay in India in
any year.
Resident:
- An individual is resident if any of the following
conditions are satisfied:
(i) he stayed in India for 182 days or
more during the previous year, or
(ii) he stayed in India for 365 days or more during the four
preceding years and stays in India for atleast 60 days 9 182
days in case of an Indian citizen or a person of Indian
Origin coming on a visit to India or 182 days in case of an
Indian citizen going abroad for an employment ) during the
previous year.
Stay in India for the above criteria may be continuous or
intermittent.
- Hindu Undivided Family (HUF) or firm or other Association
of persons is resident of India except in cases where the
control and management of its affairs is wholly situated
outside India in the previous year
(c) A company is resident in India if-
- it is an Indian company, or
- 9ii) during the previous year, the control and management
is situated wholly in India.
- A person resident in India, in a previous year in respect
of any source of income shall be deemed to be resident in
India in respect of his other sources of income.
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Non-Resident
A person is non-resident if he is not resident in India.
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Resident but not ordinarily resident
An individual or an HUF is treated to be not
ordinarily resident in India in any previous year if he or the
manager of HUF-
- has not been resident in India in 9 out of 10 previous
years preceding the previous year; or
- has not during the seven previous years preceding that
year, been in India for a period of or periods amounting in
all to 730 days or more.
- Thus according to condition in clause (a) a newcomer to
India would remain not ordinarily resident in India for the
first 9 years of his stay in India. Similarly, in case where
a person who is resident in India goes abroad and ceases to
be resident in India for atleast 2 years, he would upon his
return, be treated as, not ordinarily resident for the next
9 years.
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Determination of The residential status of a person
- In case of Indian citizen who leaves Indian during
previous year for the purpose of employment
Such a person is resident in India if he
satisfies the following conditions:
- He stays in India for atleast 182 days during the previous
year.
- He is resident in India for atleast 9 out of 10 years
preceding the previous year.
- He is resident in India for atleast 730 days during 7
years preceding the previous year.
- If such a person satisfies condition (a) but does not
satisfy either of the conditions at (b) or (c) above, such a
person would be resident but not ordinarily resident.
Such person would be non-resident if he does
not satisfy condition (a) stated above.
- In case of Indian citizen or a person of Indian origin
living abroad comes to India for a visit during the previous
year
The residential status of such a person is to
be determined after looking into the following
- He stays in India for atleast 182 days during the pervious
year and,
- He is resident in India for atleast 9 years out of 10
years preceding the previous year.
- He is resident in India for atleast 730 days during seven
years preceding the previous year.
The person would be resident in India if he
satisfies all the conditions (a) to (c) above.
The person would be resident but not
ordinarily resident if he satisfies the condition at (a) but
does not satisfy any or either of the conditions at (b) and (c)
above.
The person would be non-resident if he does
not satisfy the condition at 9a) above.
Thus condition (a) is of fundamental
importance and must be satisfied to be resident in India.
Conditions ( b) and (c) only help to qualify that resident
status.
- In case of any other individual
For individuals other than those included in
category ( I ) or (ii), we have to look into the following four
conditions to determine the residential status:
- He stays in India for atleast 182 days during the previous
year.
- He stays in India for atleast 60 days during the previous
year and for atleast 365 days during 4 year preceding the
previous year.
- He is resident in India atleast in 9 out of 10 years
preceding the previous year.
- He is resident in India for atleast 730 days during 7
years preceding the previous year.
A person would be resident in India if he
satisfies any of the conditions at (a) or (b) and both the
conditions at (c) and (d) i.e. he either satisfies conditions
(a) , (c) and (d) or (b), (c) and (d).
A person would be resident but not ordinarily
resident if he satisfies either of the conditions at (a) or (b)
and does not satisfy both or either of the conditions at (c) and
(d). In other words, if a person satisfies condition (a) or (b)
only but does not satisfy either (c) or (d) or both, he would be
treated as resident but not ordinarily resident in India.
If a person satisfies neither of the
conditions (a) or (b) , he is non-resident.
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