Saturday, June 11, 2016

How to determine NRI status of Individual for Income tax purpose?

If you have just gone last year, how do you check whether you are an NRI or not? Well, this guide will help you to determine your NRI status. In general, if a person stays more than 182 days outside of India in a given financial year then he is considered as NRI (Non Resident Indian) for income tax purpose, but there are more to it. In this tutorial, I'll explain how to check NRI status in detail and why it is important to find out NRI status before filling income tax return.


One of the most common doubt for new NRIs i.e. individuals migrating to overseas for employment or business purpose in current financial year to determine their NRI or Resident status for income tax filing purpose. Since resident and non-resident has different taxation requirement (it's not mandatory for NRI to file income tax return), it's extremely important for you to determine your correct residential status for current financial year.

Remember, if you are turns out to be resident for a financial year than your Global income is subject to tax in India, which means you could be paying tax on two countries i.e country of residence and India. Though, you can avoid or get concession if the foreign country has DTAA with India e.g. USA. A financial year in India starts at 1st April and ends at 31st March.



An Individual become NRI (Non Resident Indian) :

1) When he stayed in India for less than 60 days in a financial year.

2) When he stayed in India for less than 182 days and left the country for employment or a crew member of Indian ship.

3) When he stayed in India for less than 182 days and an Indian Citizen or Indian Origin visited India in Preceding Previous year

4) When a person has stayed more than 60 days but less than 365 days in last 4 preceding previous year.




When an Individual is resident for Income tax purpose

1) If he stays in India for more than 182 days in a financial year.

2) If he stays greater than 60 days in current financial year and greater than 365 days in 4 previous preceding years.


Again a Resident individual for income tax purpose can be Resident and Ordinary Resident (ROR) or Resident but Not Ordinary Resident (R & NOR).

1) An individual becomes Resident but Not ordinary Resident (R & NOR) if he stays more than 182 days in India in current financial years but Non Resident (NR) for last 9 years or 9 Preceding Previous Year.


2) An individual will also be treated as R & NOR if he stayed more than 182 days in current financial years but less than 729 days in 7 preceding previous year, otherwise he is a ROR (Resident and Ordinary Resident)

See this diagram to get more clear idea, it explains very clearly when a person is NRI and when he is not.

How to determine resident status of NRI



That's all about how to check whether a person is NRI or not for a given financial year. In short, if a person stays more than 182 days abroad in a financial year then he is considered an NRI for income tax purpose. There are more subtle details depending upon several other factors but that is the bottom line.

You should also know when does an NRI needs to pay income tax in India as it's not mandatory for him, if he doesn't have any income in INR or generated from India.



6 comments:

  1. Hi, I have question on my NRI status. I spent initial 181 days in India & then moved out of country. However due to some unavoidable family urgency, I came to India & spent next 60 days there. During this period I was an employee of foreign entity & mostly was on leave. In this case, what will be my NRI status?

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    1. Hello @Anonymous, you didn't mentioned the actual date, which is key because if they overlap between two financial year then calculation will change. Given your situation, I assume all dates for same financial year e.g. between 1 april 2015 to 31st March 2016. Since you spent less than 181 days overseas, you will be considered resident India for taxation purpose and your global income will be taxed in India. If you already paid tax on Foreign country then you can use DTAA to pay less tax in India. I suggest, hire a chartered accountant, he will guide you better on tax saving.

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  2. Hi, NRI status seems little confusing. Say I migrated outside India in last FY for employment and spent more than 182 days in India, so for last FY I will be straight away considered as resident. In current FY, how many days I can be in India in order to be considered as NRI from tax perspective?

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  3. When an Individual is resident for Income tax purpose
    1) If he stays in India for more than 182 days in a financial year.

    2) If he stays greater than 60 days in current financial year and greater than 365 days in 4 previous preceding years.

    This is little confusing & contraindicating with statements for NR.

    So if I spend less than 60 days in India in current FY but since I have spent more than 365 days in India in 4 previous preceding years, will I be resident?

    Below statement says that I am NR if I spend less than 60 days in a FY.
    An Individual become NRI (Non Resident Indian) :
    1) When he stayed in India for less than 60 days in a financial year.

    Please elaborate if possible. Thank you. :)

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  4. My case is a bit different. I went to USA on family sponsored Green Card & left India on Sept 20, 2016. That means my stay in India was less than 182 days. But I according to my view satisfy the 2nd condition (If he stays greater than 60 days in current financial year and greater than 365 days in 4 previous preceding years) to qualify to be Indian Resident. Will some please one give me the correct view so that I can indicate the same in my ITR?,

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    1. Hello @Anonymous, if you didn't went abroad for employment and spend more than 365 days in India in last 4 years then also you need to answer few questions e.g.

      Have you been a resident of India in the past 2 out of 10 preceding years? If Yes, then How long have you been in India for last 7 years? If less 729 days then you are an RNOR (Resident but not Ordinary Resident). If you spent more than 729 days then you become ordinary resident.

      You can also check this NRI status calculator for easier identification of your NRI residential status.

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