Definition of NRI
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.

 
Who is a person of Indian Origin
  1. 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,

  1. he, at any time, held an Indian passport,
  2. (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).

 
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.

 
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:

  1. An individual is resident if any of the following conditions are satisfied:
  2. (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.

  3. 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-

  1. it is an Indian company, or
  2. 9ii) during the previous year, the control and management is situated wholly in India.
  3. 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.
 
Non-Resident

A person is non-resident if he is not resident in India.

 
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-

  1. has not been resident in India in 9 out of 10 previous years preceding the previous year; or
  2. 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.
  3. 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.
 
Determination of The residential status of a person

 

  1. 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:

  1. He stays in India for atleast 182 days during the previous year.
  2. He is resident in India for atleast 9 out of 10 years preceding the previous year.
  3. He is resident in India for atleast 730 days during 7 years preceding the previous year.
  4. 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.

  1. 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

  1. He stays in India for atleast 182 days during the pervious year and,
  2. He is resident in India for atleast 9 years out of 10 years preceding the previous year.
  3. 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.

  1. 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:

  1. He stays in India for atleast 182 days during the previous year.
  2. He stays in India for atleast 60 days during the previous year and for atleast 365 days during 4 year preceding the previous year.
  3. He is resident in India atleast in 9 out of 10 years preceding the previous year.
  4. 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.