About NRI Status
Non-Resident Indian or NRI is a term that refers to Indian citizens who spend less than 182 days in India during a financial year or live abroad for employment, business, or other reasons. For the large Indian community in Singapore, an NRI status also determines which bank account you should choose and the double taxation benefits you can avail under the India-Singapore DTAA.
Classification of Non-Resident Status in India
A non-resident Indian can be classified in different categories based on their duration and purpose of stay in a foreign country. Here are the major non-resident categories in India:
-
NRI (Non-Resident Indian):
-
Resides in India for less than 182 days in the preceding financial year.
-
May have employment or businesses abroad but retain Indian citizenship.
-
Can vote in Indian elections upon returning and registering as a resident.
-
Enjoys benefits like tax advantages, investment opportunities, and banking benefits.
-
OCI (Overseas Citizen of India)
-
For people of Indian origin living abroad.
-
Grants lifelong visa-free travel to India.
-
Allows property ownership and bank account opening in India.
-
No voting rights in Indian elections.
-
RNOR (Resident but Not Ordinarily Resident):
-
This applies to residents not meeting regular resident criteria.
-
This includes Indian citizens who have been non-residents for 9 out of the last 10 financial years, or who spent fewer than 729 days in India over the preceding 7 years.
-
Taxed on Indian income at resident rates but exempt from foreign income tax.
What is the Eligibility Criteria for NRI Status in India?
There are two main criteria to qualify as an NRI in India; they are as follows:
-
Physical Presence Criteria:
You are considered an NRI if you spend less than 182 days in India during the preceding financial year. You must stay in India for at least 365 days over the past four years, with 60 days in the specific year.Â
-
Intention to Stay Criteria:
You must reside outside India for employment, business, or any other indefinite purpose to be classified as an NRI.Â
Note: Indian citizens who leave India for employment abroad or serve as crew members on Indian ships are considered NRIs, even if they spend more than 182 days in India during the preceding financial year.
Documents Required for NRI Status
The following documents are required to apply for NRI status in India:
-
PAN Card (Form 16 in the absence of PAN Card)
-
Valid Passport
-
Employment Letter/ Student ID Card
-
Proof of Residence (Utility bills, bank statement)
Steps to Apply for NRI Status
Follow the steps mentioned below to apply for the NRI Status in India:
Step 1: Confirm eligibility based on Indian tax laws for NRI status.
Step 2: Gather necessary documents, including proof of residence abroad, valid passport, visa records, and financial statements.
Step 3: Open an NRE or NRO account with a designated bank for efficient financial management while abroad.
Step 4: Update your status to NRI with the Income Tax Department if you have a PAN card.
Step 5: Notify existing financial institutions about your NRI status to comply with regulations.
Step 6: Submit required forms for foreign remittances, depending on your financial activities.
Step 7: E-file your Income Tax Returns (ITR) in India, reporting global income as per Indian tax laws.
Step 8: Ensure your KYC records are updated with financial institutions to reflect your NRI status and foreign address.
Step 9: Explore investment options suitable for NRIs, such as ULIP plans, Money Back Plans, Child Education Plans, and Annuity Plans.
Tax Rules for NRI Status in India
Some of the essential tax rules that Non-Resident Indians (NRIs) should be aware of are mentioned below:
-
NRIs are taxed in India on income generated within the country. such as:
-
Interest income from Indian bank accounts
-
Salaries earned in India
-
Capital gains from Indian assets
-
Rental income from property in India
-
Income earned abroad by NRIs is exempt from Indian income tax, such as:
-
Earnings from foreign investments
-
Gifts received from relatives
-
Salary received from a foreign employer
-
NRIs may claim refunds for excessive TDS payments
-
Under DTAA, NRIs can seek tax credits or exemptions in their home country for taxes paid in India.
-
NRIs can open NRE and NRO accounts in India, with interest on NRE accounts not subject to taxation.
-
NRIs are subject to capital gains tax in India when selling assets.
-
NRIs are eligible for deductions and exemptions available to Indian residents.
-
NRIs must file an ITR if taxable income surpasses the threshold.
-
Foreign assets and income must be included in the Indian tax return.
-
Inherited assets and gifts received by NRIs are generally not taxed.
-
NRIs can repatriate funds earned in India, subject to RBI guidelines.
Banking Options for Singapore-based NRIs
Various banking services in India are tailored to meet the needs of NRIs in Singapore. Some of these banking services include:
-
NRE (Non-Resident External) Account:
- NRE accounts are maintained in Indian rupees and can be funded from your Singapore-sourced earnings.
- Funds can be freely repatriated.
- Interest is exempt from taxation in India.
-
NRO (Non-Resident Ordinary) Account:
- Held in Indian rupees; used for India-sourced income, such as rent, dividends, or pension.
- Funds have restricted repatriation limits in an NRO account.
- Interest is taxable in India, with TDS deducted at the standard rate unless reduced via DTAA.
-
FCNR (Foreign Currency Non-Resident) Account:
- The account is maintained in foreign currencies, including SGD.
- FCNR accounts are useful if you want to avoid currency fluctuations while investing in India.
- Principal and interest are fully repatriable, and interest is tax-exempt in India.
-
RFC (Resident Foreign Currency) Account:
-
Designed for NRIs returning to India.
-
Enables holding foreign currency funds.
-
It can be in the form of savings or term deposits.
How NRI Status Helps in Getting Double Taxation Benefits?
Being an NRI in Singapore who has income in India makes you eligible to reap benefits under the Double Tax Avoidance Agreement (DTAA) between India and Singapore. The DTAA prevents your India-sourced income from being taxed twice. To claim the lower tax rates under the DTAA, Singapore-based NRIs must submit the following documents to their insurers/banks:
Certificate of Residence (COR)
Obtain a COR from the Inland Revenue Authority of Singapore (IRAS). The document proves your tax residency in the country and can be renewed periodically.
Form 10F
File Form 10F on the Indian Tax Portal electronically and declare your NRI status.
Note that these documents must be submitted to your bank or financial institution before the income is credited to your account to avail the DTAA benefits.
Wrapping It Up
NRI status is vital in India's economic and cultural landscape, connecting the diaspora with their homeland. It brings privileges and obligations, including tax implications and tailored banking services, fostering a strong bond between NRIs residing in Singapore and India's growth and global influence.
Get returns upto 18%
Manage your funds online60k + happy customers across 25+ countries
Compare & Choose30+ Plans and 150+ Fund options
