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An
Indian Citizen who stays abroad for employment/carrying on business or
vocation 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 Governments and Public Sector undertakings on temporary
assignments are also treated as non-residents). Non –Resident foreign
citizens of Indian Origin are treated on par with non-resident Indian
Citizens (NRIs) for the purpose of certain facilities.
Main
categories of NRIs
The
following are the main three categories of NRIs:-
(i)
Indian citizens who stay abroad for employment or for carrying on a business
or Vocation or any other purpose in circumstances indicating an indefinite
period of stay abroad.
(ii)
Indian citizens working abroad on assignment with foreign government agencies
like United Nations Organisation (UNO), including its affiliates, International
Monetary Fund (IMF), World Bank etc.
(iii)
Officials of Central and State Government and Public Sector undertaking
deputed abroad on temporary assignments or posted to their offices, including
Indian diplomat missions, abroad.
Provisions
regarding Resident and Non-Resident under Income Tax Act and Foreign Exchange
Regulation Act
The
residential status of a person is decided under two different Acts, one
under Income Tax Act, 1961, ( I.T. Act) and another under Foreign Exchange
Regulation Act, 1973 (FERA). The concept of Non-Resident under FERA is
different as compared to that under Income Tax Act. Under Income Tax Act,
the residential status of a person is determined on the basis of number
of days he stays in India whereas under FERA, it is the intention of a
person to be in India or outside India would be an important factor determining
his residential status.
Provisions
under the I.T. Act
The
residential status for the Income Tax Act is determined in section 6 as
under:
1.
An individual will be treated as a resident in India in any previous year
if he fulfills any of the following two conditions:
(a)
he/she is in India in that year for period or periods amounting in all
to 182 days or more, or
(b)
Having within the four years preceding that year been in India for a period
or periods amounting in all to 365 days or more, and has been in India
for 60 days or more in that year.
2.
Under Explanation to section 6 (1) of the Income-tax Act, the residential
status of an individual who is rendering service outside India and who
visits India during leave or vacations in any previous year or an individual
who is outside India and who comes on a visit to India in any previous
year will be determined as under :
(a)
An Indian citizen who leaves India in any previous year for the purpose
of employment outside India or as a crew member of an Indian ship would
be treated as a resident in India if he stays in India in that year for
182 days or more [instead of 60 days as stated in 1 (b) above ]. Conversely,
if he stays in India for less than 182 days, he will be treated as non-resident
for that year and his foreign income would not attract tax liability.
Further,
w.e.f. 1st April, 1999, a crew member will be treated as non-resident
in India if he is on board such ship outside the territorial water of
India for 182 days or more during any year.
(b)
An Indian citizen or a person of Indian origin who resides outside India
and who comes on a visit to India in any previous year will be treated
as resident in India if he stays in India in that year for 182 days or
more [instead of 60 days as stated in 1 (b) above.]
Conversely,
he will be treated as non-resident if he stays in India in that year for
less than 182 days.
(3)
An individual (whether Indian citizens or not) who is outside India and
who comes on a visit to India in any previous year will be treated as
"non-resident" in India if he stays in India in that previous
year less than 182 days subject to the condition that during the preceding
four previous years his stay in India does not amount to 365 days or more.
An
Individual who fulfills any of the conditions mentioned in section 6(1)
is treated as resident in India. But in order to become an "ordinarily
resident", he must satisfy the following two conditions as laid down
under section 6(6) (a) of the Income-tax Act, 1961:
(i)
He should have been resident in India in nine out of the ten previous
years preceding the previous year in which he is resident within the meaning
of section 6(1); and
(ii)
He should have been in India for a period or periods amounting in all
to 730 days or more during the seven years preceding that previous year.
If
he does not fulfill any of the above conditions, he will be treated as
"not ordinarily resident".
(4)
An individual who does not satisfy both the conditions as mentioned above
as laid down in section 6 (1) will be treated as "non-resident"
in that previous year.
(5)
A Hindu undivided family, firm or other association of persons will be
treated as "non –resident" in India in any previous year
if the control and management of its affairs is situated wholly outside
India during that year.
(6)
A company will be treated as "non-resident" in India in any
previous year if it is not an Indian company and also the control and
management of its affairs is not situated wholly in India in that year.
The
Provisions under Foreign Exchange Regulation Act
(FERA) :
Section
2 (p) and 2 (q) of FERA define resident and non-resident as under:
2(p)
"person resident in India" means-
(i)
a citizens of India ,who has, at any time after the 25th day
of March, 1947, been staying in India, but does not include a citizens
of India who has gone out of, or stays outside, India in either case-
(a)
for or on taking up employment outside India, or
(b)
for carrying on outside India a business or vocation outside India, or
(c)
for any other purpose, in such circumstances as would indicate his intention
to stay outside India for an uncertain period.
(ii)
a citizen of India, who having ceased by virtue of paragraph (a) or paragraph
(b) or paragraph (c) of sub-clause (i) to be resident in India, return
to, or stays in, India, in either case-
a)
for or on taking up employment in India, or
b)
for carrying on in India a business or vocation in India, or
c)
for any other purposes, in such circumstances as would indicate his intention
to stay in India for an uncertain period.
(iii)
a person, not being a citizen of India, who has come to, or stays in India,
in either case-
a)
for or on taking up employment in India, or
b)
for carrying on in India a business or vocation in India, or
c)
for any other purpose, in such circumstances as would indicate his intention
to stay in India for an uncertain period.
(iv)
a Citizen of India, who not having stayed in India at any time after the
25th day of March, 1947, comes to India for any of the purpose
referred to in paragraphs (a), (b), and (c) of the sub-clause (iii) or
for the purpose and in the circumstances referred to in paragraph (d)
of that sub-clause or having come to India stays in India for any such
purpose and in such circumstances.
Explanation.-
A person, who has, by reason only of paragraph (a) or paragraph (b) or
paragraph (d) of sub-clause (iii) been resident in India, shall, during
any period in which he is outside India be deemed to be not resident in
India.
Clarification
:
(A)
It has been clarified in the Exchange Control Manual (ECM) that Indian
Citizens who proceed abroad for business visits, medical treatment, study
which do not indicate their intention to stay outside in India for an
indefinite period will be considered as "person resident in India"
during their temporary absence from India.
(B)
An office or a branch situated in India, of any business, whether carried
on by a body corporate or otherwise, whether Indian or Foreign, is treated
for all purpose of FERA as "person resident of India".
2
(q) "person resident outside India" means a person who is not
resident in India . Thus the term "non-resident" is synonymous
with the term, "person resident outside India".
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