Non-Resident Indian (NRI) — Meaning & Tax Status | Savlana Init

NRI Taxation · Definition & Status

Non-Resident Indian — Two Laws. Two Definitions.

The Income Tax Act and FEMA define a non-resident differently, and you can be one under the first and not the other. We establish your position under both and structure your affairs accordingly.

“NRI” is used loosely in conversation but precisely in law, and the two statutes that matter define it on entirely different logic. Under the Income Tax Act, 1961, residence is a mechanical day-count test applied afresh each financial year under Section 6 — you count days physically present in India and the arithmetic decides your status. Under the Foreign Exchange Management Act, 1999, residence turns on intention and purpose of stay: a person who leaves India for employment, business or an uncertain-duration stay abroad becomes a person resident outside India, often from the date of departure.

The gap between the two is not academic. FEMA status governs what bank accounts you may hold, whether you may buy agricultural land, how you invest in shares and mutual funds, and what you may repatriate. Income tax status governs what income is taxable and at what rate. In the year of departure or return, it is entirely normal to be a resident for tax purposes and a person resident outside India under FEMA at the same time — which means resident tax treatment on global income alongside NRE accounts and non-resident investment routes.

Overlaid on this are two further categories that are often confused with NRI status. A Person of Indian Origin is defined by ancestry — broadly, someone who or whose parents or grandparents were born in undivided India. An Overseas Citizen of India holds a registration under Section 7A of the Citizenship Act, 1955. Neither is a citizenship in the ordinary sense, and neither by itself makes a person non-resident. What they do is unlock specific concessions in the residence tests, in investment regulation and in property rules. We establish exactly where you sit across all four labels before anything else is planned.

Our NRI Status Services

Dual Status Opinion

A written determination of your status under both the Income Tax Act and FEMA for each relevant year, with the day-count and intention analysis recorded.

NRI, PIO and OCI Classification

Assessment of which category you fall into and which specific concessions in tax, banking, investment and property law follow from it.

Bank Account Structuring

Guidance on NRE, NRO and FCNR account selection, permitted credits and debits, joint holding rules, and the resident account conversion required on status change.

Taxability Mapping

A line-by-line map of your income streams showing what is taxable in India, at what rate, and what deduction at source should apply to each.

Investment Compliance

Advice on the non-resident route for equities, mutual funds, the Portfolio Investment Scheme, bonds and deposits, and the reporting each carries.

Property Transactions

Rules on acquisition, holding and transfer of immovable property by non-residents, including the prohibition on agricultural land, farmhouses and plantation property.

Treaty Position Advisory

Determination of treaty residence where two countries both claim you, application of the tie-breaker tests, and the documentation needed to invoke them.

Status Change Documentation

Redesignation of accounts, intimation to banks, brokers and registrars, and PAN and KYC updates when status changes in either direction.

Our Process

Fact Gathering

We take your passport travel history, purpose and duration of stay abroad, employment or visa position, and the profile of assets and accounts held in India.

Statutory Test Application

Section 6 day-counts are run for each year in question, and the FEMA intention test is applied to your departure or return separately.

Status Opinion

You receive a written opinion setting out your status under each law, the reasoning, and the consequences that flow from it.

Structuring and Redesignation

Accounts, investments and holdings are aligned to the correct status — including account redesignation and intimation where a change has occurred.

Ongoing Review

Status is re-tested each year, because Section 6 gives no permanent answer and a single long visit can reverse the position.

Why It Matters

✓Clarity on status under both the Income Tax Act and FEMA

✓Correct account type — NRE, NRO or FCNR — for each purpose

✓PIO and OCI concessions identified and actually claimed

✓Investment routes matched to status, avoiding regulatory breach

✓Property acquisition restrictions flagged before you commit

✓Treaty tie-breaker position documented where two countries claim you

✓Clean redesignation of accounts when status changes

✓Annual re-testing, so a long visit home does not create a surprise

Frequently Asked Questions

The Act does not define “NRI” as such — it defines “resident” in Section 6, and anyone who fails those tests is a non-resident. You are resident if you are in India for 182 days or more in the financial year, or for 60 days or more in the year and 365 days or more across the four preceding years. Modified thresholds apply to Indian citizens leaving for employment and to citizens and persons of Indian origin visiting India.

Yes, and it is common in the year of departure or return. FEMA looks at the purpose and intended duration of your stay, so leaving for employment abroad can make you a person resident outside India from the date of departure. The Income Tax Act ignores intention and counts days, so if you were in India for most of that year you remain resident for tax. Both positions are correct at the same time.

NRI is a residence status. PIO is an ancestry-based description — broadly a person who, or whose parents or grandparents, were born in undivided India. OCI is a formal registration granted under the Citizenship Act, 1955 to certain foreign nationals of Indian origin. A PIO or OCI cardholder may be resident or non-resident; the labels affect specific concessions, not residence itself.

A non-resident may hold an NRE account for foreign-earned funds, freely repatriable with interest exempt from Indian tax; an NRO account for Indian-sourced income such as rent, dividends and pension, with interest fully taxable and repatriation subject to limits; and an FCNR deposit held in foreign currency to remove exchange risk. An ordinary resident savings account must be redesignated on becoming non-resident.

A non-resident may acquire residential and commercial immovable property in India without prior approval of the Reserve Bank. Agricultural land, plantation property and farmhouses cannot be purchased, though they may be inherited or received as a gift. Payment must be made through normal banking channels from NRE, NRO or FCNR funds; foreign currency cannot be paid directly to the seller.

No. Non-residents remain taxable on income received in India or accruing or arising in India — rent from Indian property, capital gains on Indian assets, interest on NRO deposits, dividends from Indian companies and Indian professional income all stay within the net. What changes is that foreign income falls outside it, and that deduction at source becomes the dominant collection mechanism.

Unsure whether you qualify as a non-resident?

Send us your travel record and a short note on why you are abroad. We will confirm your status under both the Income Tax Act and FEMA, in writing, with the consequences set out.