An NRI, or Non-Resident Indian, is an individual who holds Indian citizenship but resides outside India. NRIs may find themselves abroad for various reasons, including employment, business ventures, academic pursuits, or other commitments that necessitate an extended stay overseas. Individuals with NRI status enjoy the benefits and rights that an Indian citizen possesses. This encompasses fundamental privileges such as the right to vote and the right to acquire land in India.
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The eligibility criteria for NRI (Non-Resident Indian) status are as follows:
An Indian citizen or a Person of Indian Origin (PIO) staying abroad for 183 days or more in one financial year.
An Indian citizen or a Person of Indian Origin (PIO) staying in India for less than 365 days in the last four years from the current assessment year and less than 60 days during the year.
People living outside India are classified into four categories:
The NRI (Non-Resident Indian) status is designated for Indian citizens who reside in India for less than 182 days during the preceding financial year. Income earned by NRIs outside of India is not subject to taxation, but any income sourced from investments within India is liable for tax.
The Persons of Indian Origin (PIOs) is used to refer to foreign nationals of Indian origin. PIO status is held by those who are foreign nationals but have a connection in India, such as having held an Indian passport at any point in time, having Indian parents, or being married to a spouse who is an Indian citizen. PIOs (Persons of Indian Origin), are individuals with Indian ancestry or heritage, even if they may not hold an Indian passport.
OCIs, or Overseas Citizens of India, are individuals with roots in India who now live in foreign countries (excluding Pakistan and Bangladesh). They hold a lifetime visa and, as of January 15, 2015, the PIO Card Scheme was withdrawn and merged with the OCI Card Scheme by the Government of India.
Expats are individuals who are originally from India but are currently living and working in a foreign country. They have chosen to reside outside of India for various reasons, such as employment opportunities, education, family, or personal pursuits. These expatriates contribute to the global Indian diaspora and maintain ties with their homeland while adapting to the culture and lifestyle of their host country.
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NRI status refers to Non-Resident Indian status, which is determined by two different laws: the Income Tax Act and the Foreign Exchange and Management Act (FEMA). The Income Tax Act assesses NRI status for tax purposes, helping to analyze tax liabilities. FEMA, on the other hand, defines NRI status for investments, transactions, and the process of opening a bank account.
As per the Income Tax Act of 1961, an individual who is either an Indian citizen or of Indian origin is categorized as an NRI under section 6.
However, if an individual's taxable income in India exceeds Rs 15 lakh, they are regarded as a resident if:
They have spent 120 days or more in India in the year immediately prior.
They have been in India for a total of 365 days or more over the previous 4 years.
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As per FEMA (Foreign Exchange Management Act), a Non-Resident Indian (NRI) is an individual who has left India or is residing outside the country due to reasons such as employment, business, occupation, or any other circumstance indicating an intention to stay abroad for an uncertain period (e.g., jobs or assignments without a fixed return date to India).
This category also includes individuals who are citizens of India or People of Indian Origin (PIOs) residing outside India (which encompasses foreign citizens of Indian origin, like those who previously held Indian citizenship, were born in India, or have Indian citizen parents).
A Resident but Not Ordinary Resident (RNOR) in India is an individual who qualifies as a resident for tax purposes but is not considered an ordinary resident due to specific criteria.
To be considered an RNOR, a person must have either:
Resided in India for less than 729 days during the preceding seven financial years.
Been a non-resident in India for at least nine out of the ten preceding financial years.
With the new amendments made in the financial year 2020-21, people having taxable income more than 15 lakhs, staying in India for 120 days or more but not over 182 days, are resident individuals and will assume RNOR status.
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A Double Tax Avoidance Agreement (DTAA) is a treaty signed between two countries to prevent NRIs from facing double taxation issues in both their home country and the source country when transferring money. For example, if income is generated in India, NRIs can apply for a Tax Residency Certificate along with Form 10F and PAN to avail the benefits. However, if interest income goes to an NRI account, a tax of 20% plus surcharge and cess is applied on the amount.
There are several types of NRI (Non-Resident Indian) accounts designed to cater to the specific financial needs of NRIs. Below are the types:
NRE Account (Non-Resident External Account): This is a rupee-denominated account where you can deposit foreign earnings, and the funds are fully repatriable. This means you can freely convert and transfer the money abroad.
NRO Account (Non-Resident Ordinary Account): This is also a rupee-denominated account, but it is designed for income earned in India, like rent, dividends, etc. The funds in this account have limited repatriability, subject to certain conditions.
FCNR (Foreign Currency Non-Resident) Account: This is a term deposit account in foreign currency, maintained by NRIs. The account can be held in major foreign currencies, and the interest earned is fully repatriable.
RFC (Resident Foreign Currency) Account: This is for NRIs who return to India and become residents again. They can maintain this account in foreign currency. It allows for easy management of foreign earnings.
No, as per FEMA guidelines, an NRI cannot maintain a Resident Saving Account. They must convert it to an NRO account after acquiring NRI status to comply with regulations. Continuing with a resident account may result in penalties.
Global Exposure: NRIs get exposure to diverse cultures, languages, and lifestyles, which can lead to personal growth and development.
Financial Diversification: NRIs can invest in multiple currencies and markets, reducing risk and potentially increasing returns.
Tax Benefits: NRIs can enjoy tax benefits on their NRE and FCNR accounts. Additionally, they can also avail tax benefits on home loans.
Remittance Benefits: NRIs can send money back to India, which supports their families and contributes to the country's economy.
Dual Citizenship or Residency: NRIs can maintain their Indian passport, allowing them to retain their Indian identity while also having the opportunity for employment in a foreign country.
Networking Opportunities: Being part of the global Indian diaspora can lead to valuable networking connections, both personally and professionally.
Cultural Enrichment: NRIs have the opportunity to immerse themselves in a new culture, broadening their perspectives and enriching their lives.
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Change in residential status brings massive changes in your way of living and managing your finances, especially for NRIs. For NRIs, investing in India provides financial security to their families and their future when returning to India. It is always advisable to be aware of the amendments in laws so that one can avail of applicable benefits.
Past 10 Year annualised returns as on 01-12-2023
^Tax benefit are for Investments made up to Rs.2.5 L/ yr and are subject to change as per tax laws.
*All savings are provided by the insurer as per the IRDAI approved insurance plan.
Tax benefit is subject to changes in tax laws. Standard T&C Apply
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