So often, we use the term NRI (Non Resident Indian), but not everything is as simplified when it comes to tax implications when you earn your money outside India. Let us understand the conditions in which you can be termed as an "NRI". This is fundamental to understanding what taxes are applicable for you, and where you can save or invest money...read on...
NRI Definition as per IT Act
The beauty is that our Income Tax Act has not directly defined any term called as "Non Resident Indian (NRI)". It is actually defined in a reverse manner.
Section 6 of the Income Tax Act contains detailed criteria of who is considered as "Resident Indian" and provides that anyone who doesn’t meet these criteria is to be considered as a "Non-Resident Indian".
The status of a person as a resident or nonresident depends on his or her period of stay in India. The period of stay is counted in number of days for each financial year beginning from 1st April to 31st March (known as previous year under the Income-tax Act).
Who is a Resident Indian?
An individual will be treated as a Resident in India in any previous year if he/she is in India for:
Condition 1 : At Least 182 days in that year (at a high level, more than 6 months)
OR
OR
Condition 2 : At least 365 days during 4 years preceding the previous year AND At least 60 days in the previous year.
Who is a Non Resident Indian?
Any individual who does not satisfy both the conditions as mentioned above will be treated as "non-resident" in that previous year.
A few examples to clarify the definition:
Example 1 :
If you have been outside India for 3 months (90 days) in the previous financial year (for which you want to know your tax implications), you can be considered an NRI only if you have stayed for another 275 days in the 4 years preceding the previous year, else you will considered as a Resident Indian.
Example 2 :
If you have stayed outside India for 365+ days in the previous four years preceding the last year, but have stayed outside India for only 30 days in the last year, then again you will be considered as a Resident Indian.
Special Relaxation in the Definition:
Who is a Non Resident Indian?
Any individual who does not satisfy both the conditions as mentioned above will be treated as "non-resident" in that previous year.
A few examples to clarify the definition:
Example 1 :
If you have been outside India for 3 months (90 days) in the previous financial year (for which you want to know your tax implications), you can be considered an NRI only if you have stayed for another 275 days in the 4 years preceding the previous year, else you will considered as a Resident Indian.
Example 2 :
If you have stayed outside India for 365+ days in the previous four years preceding the last year, but have stayed outside India for only 30 days in the last year, then again you will be considered as a Resident Indian.
Special Relaxation in the Definition:
Definition of Resident is relaxed by dropping Condition 2 given above (i.e. only Condition 1 is applicable), for the following cases:
- An Indian citizen who leaves India in any year for the purpose of employment outside India or as a crew member of an Indian ship,
- An Indian citizen or a person of Indian origin who resides outside India and who comes on a visit to India. Note that a person shall be deemed to be of Indian origin if he, or either of his parents or any of his grand-parents, was born in undivided India.
What are NRE / NRO accounts?
Once you know that you are an NRI, you must get a fundamental understanding of NRI / NRO accounts to keep your money at the right places.
Read more here:
http://elevate-your-life.blogspot.in/2013/10/what-are-nre-and-nro-accounts-for-nris.html
http://elevate-your-life.blogspot.in/2013/10/what-are-nre-and-nro-accounts-for-nris.html
Where else can NRIs invest money?
Other than keeping money in NRI / NRO accounts, there are host of other investment options available for NRIs.
Read more here:
http://elevate-your-life.blogspot.in/2013/10/investment-options-for-nris.html
http://elevate-your-life.blogspot.in/2013/10/investment-options-for-nris.html
DTAA (Double Taxation Avoidance Agreement)
As an NRI, you may get stuck in tax net of your home country and the country you are earning money. Dont worry, you have Double Taxation Avoidance Agreement (DTAA) for NRIs.
Read more here :
http://elevate-your-life.blogspot.in/2013/12/dtaa-double-taxation-avoidance.html
http://elevate-your-life.blogspot.in/2013/12/dtaa-double-taxation-avoidance.html
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The book "From the Rat Race to Financial Freedom" has many such investment concepts explained in a very simple and uncomplicated manner.
Cheers
Manoj Arora
Freedom can buy you.... what money cannot !!
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ReplyDeleteThank you for sharing such great information. It is informative, can you help me in finding out more detail on NRI account, i am interested and would like to know more about this field and wanted to understand the basics of NRI account