NRI Income Tax Definition
NRIs CORNER - NRI Definition under Income Tax
NRI DEFINITION UNDER THE INCOME-TAX ACT,1961 [ IT Act ] :
The second important definition is incorporated in the Income-tax Act of 1961 [IT Act] being wedded to Individual's Physical Stay in India during a Financial Year beginning from 1st April and ending on the 31st March every year as also in preceding 4 , 7 and 10 years. IT Act lays down that any person including an Indian or Foreign citizen of Indian Origin residing outside India will be treated as Non-Resident [Indian] as under:
Provided: “his stay in India does not exceed as mentioned here in below during a financial year commencing on 1st April and ending on 31st March".
The stay need not be a continuous one as it is the total number of days during a Financial Year, which are taken into account while arriving at the Residential Status and it is important to note that the day of arrival and the day of departure are both included in number of days of stay in India.
.01 Resident of India:
(i) his stay in India 182 days or more during such year :
(ii) his stay in India totaling to 60 days or more in relevant year in addition to his stay totaling to 365 days or more in immediately preceding 4 years.
However second condition of 60 days stay does not apply to NRIs visiting India and as such 182 days or more stay in India will be applicable to NRIs.
Now by Finance Act, 2020 government has incorporated deemed provision in which case also NRIs will be treated as Resident of India:
(i) In case NRIs having taxable income in India exceeding INR 15 lakhs than he will be treated as Resident of India if his stay in India totaling to 120 days or more in relevant year in addition to his stay totaling to 365 days or more in immediately preceding 4 years.
(ii) In case of Indian Citizen (having Indian Passport) if he is having taxable income in India of more than 15 lakhs (including income earned from the business /profession operated/controlled from India).
he is not liable to tax in any other country on the basis of his domicile, residency etc. then he will be treated as deemed resident of India for the said Financial Year.
(iii) However for determining Residential Status of an NRI returning to India for permanent settlement , for the year of return, besides the stay not exceeding 181 days an additional condition is applicable that of stay not totaling to 60 days or more in relevant year if his stay in earlier 4 years totaled to 365 days or more.
(iv) A resident of India being Indian citizen leaving India for taking up employment or joining as a crew of an Indian ship will be treated as a Non-Resident if his stay in India in the year of departure did not exceed 181 days. Thus in case of NRIs residing abroad physical stay in India not exceeding 181 days in a financial year is the only factor that determines their status as Non Resident .
.02 Resident but Not Ordinarily Resident (R but NOR)
A Resident is further defined as Not Ordinarily Resident provided such individual has been:
(i) A non- resident in 9 out of 10 Financial Years preceding the current year
his stay in India totals to 729 days or less in 7 financial years preceding the current year.
(ii) A citizen of India who is deemed to be resident of India than although a Resident, he will be defined as "Resident but Not Ordinarily Resident"
(iii) A Citizen of India or Person of Indian Origin having taxable income other than foreign source income in India exceeds INR 15 lakhs or more and if he stay in India for more than 120 days but less than 182 days
The importance of said definition is substantial as the global income of a returning Indian is not liable to tax in India so long as he is Non-Resident or R but NOR .
.03 Resident and Ordinarily Resident (R & OR)
Although this is not a specified definition, but is a popular jargon on account of the taxability of Global Income in case of a Resident who is not a Not Ordinarily Resident, conversely said to be Resident and Ordinarily Resident who fulfills the conditions of:
(i) Not being a Non- Resident in 9 out of 10 Financial Years preceding the current year.
Whose stay in India totals to 730 days or more in 7 financial years preceding
the current year.
Thus , the Global Income of a returning Indian is liable to tax in India once he is R & OR , which will be subject to reliefs and provisions of Double Tax Treaty , if any , between India and the country wherefrom such income arises.