Determining Non-Resident Indian (NRI) Status
A ‘Non-Resident Indian’ (NRI) is an individual who is a citizen of India or a person of Indian origin, and who is not considered a resident in India. The residential status of an individual must be determined under Section 6 of the Income-tax Act, 1961. Here’s how to determine if an individual qualifies as an NRI:
Definition of NRI
An individual is considered an NRI if they meet the criteria defined under Section 6 of the Income-tax Act.
Conditions to Determine Residential Status
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General Conditions:
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Condition 1: If the individual is in India for a period of 182 days or more during the previous year.
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Condition 2: If the individual is in India for a period of 60 days or more during the previous year and 365 days or more during the four years immediately preceding the previous year.
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Exceptions for Indian Citizens and Persons of Indian Origin:
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For an Indian citizen or person of Indian origin visiting India during the year, the period of 60 days as mentioned in Condition 2 is substituted with 182 days.
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Similar concession applies to Indian citizens leaving India in any previous year as a crew member or for employment outside India.
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Amendments by the Finance Act, 2020:
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Effective from Assessment Year 2021-22, if an Indian citizen or a person of Indian origin has a total income, excluding income from foreign sources, exceeding Rs. 15 lakhs during the previous year, the period of 60 days is substituted with 120 days.
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Income from Foreign Sources: Refers to income which accrues or arises outside India, except income derived from a business controlled in or a profession set up in India.
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Additional Provision
The Finance Act, 2020 introduced Section 6(1A) to the Income-tax Act, 1961, which states:
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An Indian citizen is deemed to be resident in India if their total income, excluding income from foreign sources, exceeds Rs. 15 lakhs during the previous year.
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Such individuals are considered residents only if they are not liable to tax in any country due to their domicile, residence, or any other similar criteria.
Definition of Person of Indian Origin
A person is deemed to be of Indian origin if they, or either of their parents or any of their grandparents, were born in undivided India.
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