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The term NRI, commonly used to refer to Indians living abroad, has specific criteria to determine one's status. To be classified as an NRI, you must be an Indian citizen with an Indian passport and residing outside India.
The definition of an NRI is different under the prevailing Foreign Exchange Management Act (FEMA) regulations and Income Tax Act, 1961(IT Act). This article discusses the definition of an NRI under both the acts. Residency under FEMA mainly depends on the intent of the individual’s stay in India. If an individual wants to undertake a foreign exchange transaction such as investments made in foreign currency or foreign securities, acquisition or transfer of immovable property, they need to be aware about the FEMA residency.
Income tax residency depends on only physical stay of the individual in India irrespective of the purpose of stay. Residency under the IT Act will help you determine your taxable income and the rate at which you are liable to pay.
NRI Classification under Foreign Exchange Management Act (FEMA)
As per the prevailing FEMA regulations, you are considered as an NRI if:
- You are residing overseas (except Nepal or Bhutan) for more than 182 days in one Financial Year (April-March); or
- You have demonstrated an intent with supported documents to go abroad or reside outside of India for an uncertain period. These may include cases such as:
- A resident Indian professional before going abroad for employment.
- A student planning to study abroad;
- A seafarer who works on international ships;
- A spouse accompanying a person employed abroad.
Your residency status as per the prevailing FEMA regulations determines your eligibility for making financial transactions in India such as opening NRI bank accounts, making investments, repatriating funds, etc. On the other hand, it is important for you to understand your residential status under IT Act to determine your tax liability in India.
NRI classification as per the Income Tax Act, 1961
A person is a non-resident Indian if he/she does not meet the residency criteria as below:
- You have been in India for 182 days or more during the previous Financial Year; or
- You were in India for a period of 60* days or more during the previous Financial Year and 365 days or more during the four years immediately preceding the previous Financial Year.
*The period of 60 days is substituted by:
- 182 days if he/she is an Indian citizen leaving India for the purpose of employment or as a member of the crew of the Indian ship.
- 182 days if he/she is an Indian citizen or Person of Indian Origin (PIO)/Overseas Citizen of India (OCI) residing abroad and coming on a visit to India but having income less than ₹15 lakh from Indian sources.
- 120 days if he/she is an Indian citizen or PIO/OCI coming on visits to India but having income greater than ₹15 lakh from Indian sources.
If you fulfil any of the above conditions, you are regarded as a ‘resident’ of India for the previous year. In case you are unable to fulfil any of the above conditions, you will be regarded as a ‘non-resident’.
Who is a Person of Indian Origin (PIO)?
According to the Citizenship Act of 1955, of India, you are considered as a PIO if you are a citizen of a foreign country and:
- You held a valid Indian passport at any time; or
- If you or any of your parents, grandparents, or great-grandparents were born in India as defined in the Government of India Act, 1935, and in other territories that later became a part of India, provided that none of them were ever citizens of the mentioned countries (Pakistan, Bangladesh, or any other notified country*); or
- You are a spouse of an Indian citizen or a person of Indian origin who satisfies any of the above conditions.
An NRI and PIO have the same eligibility criteria to conduct financial transactions in India. However, there are certain restrictions** on a PIO. The restrictions include:
- Have employment rights in Government of India services;
- Hold any constitutional office in the Government of India;
- Indulge in mountaineering, missionary activities, research work or visit restricted areas in India without prior permission;
- Travel to India without an appropriate visa
*FAQs PIO Card
**PI and OCI, Ministry of External Affairs portal.
Who is an Overseas Citizen of India (OCI)?
The Overseas Citizenship of India (OCI) Scheme was introduced by amending the Citizenship Act, 1955, in August 2005.
Under the Act, following categories of foreign nationals are considered as an OCI:
- A person who:
- Was a citizen of India on or at any time after the commencement of the Indian constitution on January 26, 1950; or
- Is a citizen of another country but was eligible to be a citizen of India on January 26, 1950; or
- Is a citizen of another country but belongs to a territory that became part of India after August 15, 1947; or
- Is a child, grandchild, or great-grandchild of a citizen of India;
- A child under the age of 18 of the persons mentioned above;
- A minor child if one or both parents are citizens of India;
- A foreign-origin spouse of an Indian citizen or OCI, provided the marriage has been registered and subsisted for a continuous period of two years or more
Please note, there are certain exclusions from the above, OCI card eligibility is specified by the Indian government in a notification published in the Official Gazette. For more information, please refer to the notification.
Did you know?
All PIOs are obligated to convert their PIO cards to OCI cards by December 31, 2024*.
*Embassy of India, Washington, D.C. USA
As an OCI, you can apply for an OCI card on the OCI services portal. The OCI card is a lifelong visa for people of Indian origin living abroad. It allows them to visit India without applying for a visa and gives them the same rights as NRIs in most areas, except for owning agricultural land, plantation properties, or farmhouses.
As an OCI card holder, you can enjoy a number of advantages***, including:
- Quicker immigration clearance;
- Access to consular services;
- Facilitation of services in India if you decide to reside in India; and
- Same rights as NRIs in matters related to:
- Inter-country adoption of Indian children, provided you comply with the procedures as laid down by the competent authority;
- Appearing for all-India entrance tests such as National Eligibility cum Entrance Test (NEET), Joint Entrance Examination (JEE) (Mains and Advanced), or such other tests or any supernumerary seat (provided that you are not eligible for admission against any seat reserved exclusively for Indian citizens); and
- Purchase or sale of immovable properties other than agricultural land or farmhouse or plantation property;
While OCI card holders enjoy many privileges, there are some restrictions on what they can do.
As an OCI cardholders, one cannot^:
- Be members of the government;
- Hold certain high-level positions, such as President, Vice President, or Supreme Court judge;
- Get certain government jobs;
- Buy agricultural land, plantation property or farmhouse in India.
***OCI Comparative Chart, Ministry of Home Affairs portal
^OCI FAQs, Ministry of Home Affairs portal
NRI, PIO, and OCI are all terms that relate to the status of a person who is of Indian origin but living outside of India. All have the same eligibility criteria to carry out financial transactions in India. However, there are minor differences in their rights and privileges in India. Your residential status under the IT Act determines your tax liability, regardless of whether you are an NRI, PIO, or OCI. You should consult a tax expert for more details.
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