Who is NRI and how to decide status of NRI? Tax liability of Non Resident Indian

 

NON RESIDENT INDIAN (NRI)

The full form of NRI is Non-Resident Indian. It refers to a citizen of India who resides outside India; he may reside outside either   temporarily or permanently, and holds an Indian passport. There may be various reasons to live outside India, such as employment, personal reasons or education.NRI is the term is used in India to describe Indian citizens living outside the country. NRIs have certain privileges and rights in India, as well as certain responsibilities, such as paying taxes on income earned in India.

The status of an NRI (Non-Resident Indian) is depending upon the total number of days for which the individual has stayed outside India during a particular financial year. According to the Income Tax Act of India, an individual is considered an NRI if:

He has been outside India for 182 days or more during the financial year, or

He has been outside India for 60 days or more during the financial year and for a total of 365 days or more during the preceding four financial years.

If an individual fulfill anyone of the above condition, he is considered as an NRI for income tax purposes. It is important to note that NRI criteria may vary depending on the context, as different government agencies or institutions may have their own conditions for determining NRI status. For example, the Reserve Bank of India has its own rules for determining NRI status for the purpose of foreign exchange transactions.

TAX LIABILITY of NRI

To determine the tax liability of an NRI (Non-Resident Indian) in India first we need to check the individual's income and the source of that income. Tax liability of an NRI is different from the resident Indian.

As per the Income Tax Act of India, an NRI is only liable to pay tax on income earned or received in India. Income that is earned or received outside of India is not taxable in India. However, if an NRI has income from a source in India, such as rental income or capital gains from the sale of property in India, then he/she is required to pay tax on that income in India.

There are certain deductions and exemptions for which NRI is also eligible, such as the basic exemption limit, deductions for investments in specified instruments, and deductions for certain expenses incurred in earning the income. These deductions and exemptions can reduce the NRI's tax liability.

It is required for an NRI to be aware of their tax obligations in India and to comply with the tax laws. NRIs need to file an income tax return in India if their taxable income in India exceeds the threshold limit. Law is complicated therefore it is advisable to consult with the chartered accountant for his/her tax applicability.

CA KHALID REHMAN

(M.Com, Chartered Accountant)