NRI DEFINITION - UNDER Foreign Exchange Management Act,1999
Definition of an NRI:
An Indian abroad , popularly known as an NRI – has two important definitions determining his residential status - the primary one coined under the Foreign Exchange Management Act, 1999 – [FEMA] and the other coined under the Income Tax Act,1961.[ITAct]
The most relevant definition concerning an NRIs various bank accounts and investments in movable and immovable properties in India is the one provided under FEMA, which has replaced the Foreign Exchange Regulation Act , 1973- [FERA] with effect from 1st june,2000.
.01 Person Residing Outside India is the term used for an NRI , being a person who has gone out of India or who stays outside India for the purpose of employment or carrying on business or vocation outside India or any other circumstances which indicate his intention to stay outside India for an uncertain period.
.02 Non Resident Indian,the phrase not defined under FERA is now covered by regulations under FEMA as “a person resident outside India who is either a citizen of India or a person of Indian Origin".
Recently RBI has clarified that students studying abroad also be treated as NRIs under FEMA and accordingly be eligible for foreign investments and NRE/FCNR accounts.
.03 And the definition of a "Person Resident outside India" is simply put as " a person who is not Resident in India."
.04 Person of Indian Origin [ PIO ] :includes a person, being a citizen of any country other than Pakistan and Bangladesh who :
i). held an Indian Passport at any time . or
ii). himself or either of his parents or any of his grand parents were citizens of India, or
iii). is a spouse of an Indian citizen, or
iv). is a spouse of a person covered under (i) or (ii) above.
.05 PIO defined for Immovable Property in India :
PIOs definition is further narrowed when it comes to acquisition and transfer of immovable property in India. This definition of PIO excludes citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan.
Probably with an intention of ensuring & restricting control of immovable properties in the hands of strictly defined persons of Indian Origin only, for determining the Indian origin herein a PIOs father or grand father's birthplace or Indian citizenship at any time is to be considered unlike earlier other definitions referring to parents or grand parents.
Thus for matters pertaining to immovable properties a Person of Indian Origin is defined as an individual other than citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan:
.06 NOW, reading various definitions herein, it can be summarized that the definition of an NRI is not wedded to citizenship and the same covers :
i). an Indian Citizen residing outside India as also
ii). a Foreign Citizen of Indian origin residing outside India.
i. who held an Indian Passport at any time ,or
ii. who himself or his father or grandfather was a citizen of India.
3. Conditions of number of days stay in India :
.01 No doubt, FEMA definition has also incorporated an NRIs stay in India totaling to 182 days or more during preceding year , but simply speaking if a person of Indian origin visiting India is to be treated as an NRI irrespective of number of days he has stayed in India during the relevant financial year provided he has not returned to India for settlement .
.02 Stay in India during visits :
The Act also lays down that such a person will continue to be an NRI during his visit/stay in India provided he has not returned to India for taking up employment or carrying on business or vocation or any other circumstances as would indicate his intention to stay in India for an uncertain period.
Accordingly, an NRI settled abroad , irrespective of the number of days stay in India in a given year , will continue to be an NRI during his visit to India provided he has not returned to India for permanent settlement.
4. "Overseas Corporate Body" (OCB) means a Company, Partnership Firm, Society etc. wherein 60 % or more ownership lies with NRIs or a Trust wherein 60 % or more financial interest is irrevocably held by NRIs.
5. Conclusion :
At the cost of repetition, it is once again said that an NRI permanently settled and residing outside India will continue to be treated as an NRI under FEMA irrespective of the number of days of his stay in India or otherwise.