The NRIs (Non-Resident Indians) create potential growth prospects for the Indian economy and finances.
But, who are NRIs?
Well, by way of their residential status in India, people get classified as Resident Indians and Non-Resident Indians or NRIs. This is different from an individual's Indian citizenship.
Anyone not following the condition will be considered an NRI or a Non Resident Indian.
The NRI status in India is attained by people who are Indian citizens but stay in India for less than 182 days in the preceding financial year or people who live outside India for employment, business, or any other purpose for an uncertain period.
This includes people who are Indian citizens but leave India for employment or are crew members of an Indian ship. For them, the 60-days' minimum period is extended to 182 days.
The residential status for such Indian crew members is determined as follows since 01.04.2015:
Indian crew members on service on foreign ships for 182 days or more are treated as Non-Resident Indians.
An individual holding NRI status has all benefits and rights as any Indian citizen has, e.g., they are eligible for voting in the Legislative Assembly and Council election, and can buy land anywhere in India.
The PIO status (Person of Indian Origin) is given to those foreign nationals who at any time held an Indian passport or either of his/her parents is a citizen of India, or he/she is the spouse of an Indian citizen.
A person can hold the OCI (Overseas Citizen of India) status if the person has any familial connection in India. However, OCI status holders do not have all rights as any other Indian citizen or NRIs have.
An RNOR Status means Resident but Not Ordinarily Resident. To elaborate further, anyone who is an Indian Resident with any of the two conditions mentioned above as met, AND,
The rules and requirements for the residential status in India have clearly been described, but there are few differences in laws that one needs to understand. The two laws, the Income Tax Act and the Foreign Exchange and Management Act, are applied for different purposes as-.
To have a clear understanding of NRI status in India, it is essential to go through the specific criteria these laws demand. The definition of NRI is different in Income Tax laws from that of exchange control laws.
As per Section 6 of Income Tax Law, a person is an Indian Resident if:
Condition 2 is not applicable for those who are of Indian origin but live abroad and comes for a visit to India.
Taxation Rules for NRIs
As per Section 9 of the Indian Income Tax Act, irrespective of anyone's residential status, if any one of these criteria is met, the income is considered to be "accrued in India”:
Amendments in Financial Bill 2020
Here is a rundown of the amendments made in financial bill 2020:
While talking about tax liabilities, it is worth noting that an NRI may have to face double taxation as the income may be taxed in the home country and the source country. The issue can be dealt with by signing up a tax treaty known as DTAA by the home country and the source country. When a non-resident receives the interest income from India, tax is applied per prevailing tax laws, but FCNR and NRE deposits are exempt in this case.
In India, a number of banks offer NRI services; however, the features of NRI accounts they offer may be different from the other in regards to interest rates, facility of Net banking, provision of international debit card, minimum balance requirement. One must have a thorough study before opting for the best service.
In Union Budget 2021, the NRIs have been given tax relief as they have been spared from double taxation. The government has added a new Section 89A to the Income-tax Act 1961, according to which the income from the accounts opened abroad will not be taxable on an accrual basis. This income will be subject to taxation at the time of withdrawal by the foreign country. This change will be effective from April 1, 2022.
As a developing nation, India has massive scope for growth in all sectors, with its skilled workforce and availability of natural resources; it has all potential to attract foreign investors. As for NRIs, investing money in India provides a lot more profitable returns. Every year, a significant number of Indians migrate to other countries in search of employment, business, or study. As a result, there is a substantial inflow of foreign currency. Money transfer or remittances plays an essential role in blooming Indian GDP.
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*Tax benefit is subject to changes in tax laws. Standard T&C apply.