Who Qualifies as an NRI?
NRI refers to an Indian citizen who lives in a country other than India for a specified period of time. There are two main ways through which you can qualify as an NRI in India:
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Physically Staying Outside India: If you are an Indian citizen but have spent less than 182 days in India in the last financial year (April 1 to March 31), you are considered an NRI.
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Intention to Stay Outside India: Even if you spend more than 182 days in India in a year, you can still be considered an NRI if you have the intention to stay outside India for an indefinite period. This intention can be demonstrated by factors such as having a job, business, or property abroad.
Categories of NRI in India
There are the following categories of Non Resident Indians in India:
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Indians living abroad for work, study, business, or leisure.
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Indian professionals employed in global organizations such as the World Bank, WHO, UN, IMF, etc.
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Government officials from both central and state levels residing overseas.
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Public sector workers posted or employed abroad.
Residency Relaxation for UK-based NRIs in India
Under Section 6 of the Indian Income Tax Act, a person who stays in India for more than 60 days and for 365 days or more across the preceding four financial years is considered an Indian resident. Does it mean a small visit to India as an NRI can make you a resident? Let’s understand.
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If you are an NRI who has left India for employment in the UK, the 60-day test is relaxed to 182 days.
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So a short trip home won’t change your residency status in India.
Tax Benefits for UK-based NRIS in India
You can avail the following tax benefits on investing in NRI investment plans in India:
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Basic Exemption: You can enjoy a basic exemption of ₹2,50,000 in the Old Tax Regime and ₹4,00,000 in the New Tax Regime on your total income in India, except for capital gains.
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Double Taxation Avoidance Agreement (DTAA) with UK: India has a DTAA agreement with the United Kingdom (UK) to avoid double taxation on income earned in India.
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NRE and FCNR Accounts: Interest earned on these accounts in India is tax-free.
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Life Insurance: Premiums paid for NRI life insurance plans can be deducted under Section 80C, and the maturity proceeds or death benefits are not taxed.
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Section 80C Deductions: You can claim deductions on investments and expenses like ULIP Plans, Child Education Plans, and medical bills, of up to ₹1.5 lakh.
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Section 80D: Deductions can be claimed on health insurance premiums paid for yourself, your family, or parents in India.
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Section 80E: Deduct interest paid on education loans taken for yourself or your children's education in India.
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Section 80G: You can claim deductions for donations made to eligible charitable organizations.
NRI Categories in India
These are the categories of Non-Resident Indians 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.
Bank Accounts for UK-based NRIs in India
As an NRI living in the UK, you need to maintain an NRI bank account in India. Here are the primary types of bank accounts for NRIs:
NRE Account
- A Non Residential External (NRE) bank account is maintained with your foreign-sourced income and is converted into INR at the prevailing exchange rates.
- You can freely repatriate your money back to the UK without any restrictions.
- The interests earned from an NRE account are not taxable in India as long as you hold an NRI status.
NRO Account
- A Non Residential Ordinary (NRO) bank account is designed for managing your India-sourced income like rent, dividends, proceeds from the sale of immovable property, etc.
- This account comes with a repatriation limit, while interest earned remains taxable in India.
FCNR Account
- A Foreign Currency Non-Resident (FCNR) bank account is held in a foreign currency, including GBP and reduces the risk from currency fluctuations.
- The interests remain tax-free in India as long as you hold an NRI or RNOR status.
Benefits of NRI Status in India
The following are the key benefits of an NRI Status in India:
- Investment opportunities: NRIs can invest in diverse sectors like real estate, the stock market, mutual funds, and infrastructure bonds in India.
- Repatriation of funds: NRIs can freely transfer investment earnings and principal amounts back to their home country.
- Special investment schemes: NRIs have access to unique investment schemes like NRI accounts (NRE and NRO) and Portfolio Investment Scheme (PIS).
NRI vs OCI
The PIO or Persons of Indian Origin scheme was discontinued and merged with Overseas Citizen of India (OCI) in 2015. PIO now holds the same rights and definition as OCI. A simple comparison of NRI and OCI status in India is mentioned in the following table:
| Aspects |
NRI |
OCI |
| Definition |
An Indian citizen who is resident outside India under applicable rules. |
A foreign citizen of Indian origin who is registered as an OCI cardholder. |
| Citizenship |
Indian citizen |
Not an Indian citizen; remains a citizen of another country |
| Voting rights |
Yes, subject to applicable electoral requirements |
No |
| Visa/India stay |
Generally does not need a visa to enter India |
OCI card provides a multiple-entry, lifelong visa for visiting India, subject to applicable rules |
| Property ownership |
Can acquire property in India, subject to applicable laws |
Can acquire certain immovable property in India, but not agricultural land, farmhouses or plantation property |
| Dual citizenship |
India does not permit dual citizenship |
OCI is not dual citizenship; the person retains foreign citizenship |
| Status duration |
Depends on residential status; can change based on residence and applicable rules |
Generally lifelong, unless cancelled |
FAQs
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Are NRI citizens of India?
Yes, NRIs (Non-Resident Indians) are considered as Indian citizens. However, their residency status affects certain rights and privileges within India.
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What is an NRI account in India?
An NRI account is a bank account in India specifically designed for Non-Resident Indians. These accounts offer tax benefits and repatriation facilities not available to resident accounts. There are two main types:
- Non-Resident (External) Rupee (NRE) Account: Interest earned on these accounts is tax-free in India. You can deposit and repatriate funds freely.
- Foreign Currency Non-Resident (FCNR) Account: Deposits are made in foreign currency and earn interest in the chosen currency. Interest income is taxable in India but not in the United Kingdom (UK) due to Double Tax Avoidance Agreements.
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What is an example of an NRI?
Following are some of the examples of an NRI in India:
- An Indian citizen working in the UK on a long-term visa.
- An Indian student studying abroad.
- An Indian who has retired and moved to another country.
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What is the NRI status in India?
NRI status determines your tax residency, property ownership rights, voting rights, and other legal considerations in India. You are considered an NRI if you spend less than 182 days in India in a financial year.
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Are interests earned from an NRI account taxable in the UK?
While interest from NRI accounts such as NRE or FCNR is tax free in India, the UK taxes the worldwide income, including any interest earned from deposits in these types of accounts.
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How to avail double taxation benefits as a UK-based NRI?
To avail the DTAA benefits as an NRI living in the UK, you need to obtain a Tax Residency Certificate from HMRC in the UK and submit the Form 10F on the Indian tax portal. The India-UK DTAA also allows you to claim Foreign Tax Credit on your self-assessment return for tax already paid in India.
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Do UK NRIs get the same tax benefits as Indian residents?
The UK-based NRIs get most of the tax benefits an Indian resident is eligible for. However, under the New Tax Regime, only a resident Indian can avail a tax-free income of up to ₹12 lakh through rebates provided under Section 87A of the Income Tax Act. NRIs are not eligible for such benefits.
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Who are NRI students?
Indian students studying abroad on long-term visas are considered NRIs.
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Does NRI pay tax in India?
NRIs have different tax liabilities depending on their income sources and types of accounts held in India.
- Income earned in India: NRIs generally pay tax in India on income earned within India at a concessional rate.
- Income earned abroad: NRIs are not taxed in India on income earned outside India unless it is brought into India.
- NRI accounts: Interest earned on NRE and FCNR accounts is exempt from tax in India as long as you maintain the NRI or RNOR status.
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