JVIRAHYAS@GMAIL.

COM
NON-RESIDENT
Who is a Non- Resident? How does one become one? There are two definitions:- one under the Foreign Exchange Management Act, 1999 (FEMA), another under the Income Tax Act 1961. There had been one under the Foreign Exchange Regulation Act, 1973 (FERA) but that is not relevant as the act has been repealed. 1. Under the Foreign Exchange Management Act

The Foreign Exchange Management Act 1999 (FEMA) replaced the Foreign Exchange Regulation Act effective June 2000. Sections 2(v) and 2(w) of this Act has the following definitions Person resident in India is: (i) A person residing in India for more than one hundred and eighty two days during the course of the preceding financial year but does not include: (A) A person who has gone out of India or stays outside India, in either case (a) for or on taking up employment outside India or (b) for carrying on outside India a business or vocation outside India or (c) for any other purpose in such circumstances as would indicate his intention to stay outside India for an uncertain period. (B) A person who has come to or stays in India, in either case other than: (a) for or on taking up employment in India or (b) for carrying on in India a business or vocation in India or (c) for any other purpose in such circumstances as would indicate his intention to stay in India for an uncertain period. (ii) (iii) Any person or body corporate registered or incorporated in India An office, branch or agency in India owned or controlled by a person resident outside India An office, branch or agency in India outside India owned or controlled by a person resident in India

(iv)

Person resident outside India is a person who is not resident in India i.e. a person who stays outside India or has otherwise gone out of India.

(a) for or on taking up employment outside India, or (b) for carrying on outside India a business or vocation outside India, or (c) for any other purpose in such circumstances as would indicate his intention to stay outside India for an uncertain period.

2.

Under the Income Tax Act

Tax liability in India is determined by the residential status of an individual. There are three categories: Non Resident Not Ordinarily Resident Resident

Non Resident: Under Section 115C (e) of the Income Tax Act 1961, a Non Resident Indian means an individual, being a citizen of India who is not a resident. Thus every Indian citizen who is a non resident in India in any previous year is a Non Resident Indian. A person is considered Non Resident under the Income Tax Act of his stay in India does not exceed the limits specified below in a financial year. In this context a financial year is considered to be from April 1 to March 31. Stay does not exceed (i) General rule (ii) Person whose total staying India during the proceeding 4 years has not exceeded 364 days (iii) year of leaving India for employment outside India (Indian citizens only) (iv) Year of leaving India as a member of the crew of an Indianship (Indian Citizens only) (v) Visits to India (for Indian citizens and persons of Indian origin only) 59 days

181 days

181 days

181 days

181 days.

An individual of India origin , though not a citizen of India is also considered a Non Resident Indian A person is considered to be a person of Indian origin if he, or either of his parents or only of his grandparents were born in undivided India. This does not include those in Pakistan or Bangladesh. Not Ordinarily Resident A resident individual is treated as not ordinarily resident (NOR) if he satisfies either of the following tests: 1. He has not been a resident in India for nine of the ten preceding years; or 2. If he has not been in India for a period of 730 days or more during the preceding seven years. 3. A Hindu Undivided family whose manager has been a Non Resident in India in nine out of ten previous years preceding that year or has during the seven years preceding that year been in India for a period of, or periods amounting in all to 729 days or less. The advantage of being an NOR is that any foreign income earned while the individual is not ordinarily resident will be exempt from income tax even if the person is in India for all or most for the time or has returned to India. The foreign income should not have been derived from a business controlled in or a profession set up in India.` Under the Income Tax Act, the year is from April 1 to March 31. The day of arrival and the day of departure are considered as days in India. For this purpose the date stamped on the passport is considered proof. If your flight is at 1.00 a.m. in the morning, it is wise to check in and go through immigration before midnight. It should be noted that the number of days in India are calculated strictly and even one days excess stay will change a persons status. Resident in India It is also important to be aware of what a resident is. Section 6 (i) of the Income Tax defines a resident as a person who has: (a) In that year been in India for a period or periods amounting in all to 182 days or more, or

(b) Within the four year preceding that year been in India, for a period or periods amounting in all to 365 days or more and has been in India for 60 days or more in that year. The period of 60 days is changed to 182 days in the case of an Indian citizen who leaves India as a member of a crew of an Indian ship or for the purpose of employment outside India. 60 days is changed to 182 days in the case of an Indian citizen who comes to India for whatever purpose. The Central Board of Direct Taxes (CBDT) circular No. 586 dated November 28, 1990 states that the Indian members of a crew of a foreign going Indian ship would be Non Resident if they board such ships outside the territorial waters of India for 182 or more during any year. Seamen will be charged to tax only for the period they are working within Indian waters on coastal ships. A Hindu undivided family (HUF) firm or association of persons or body of individuals is resident in India is any previous year except where during that year the central and management of its affairs is situated wholly outside India. Even if a part of the control and management of the affairs of a HUF or partnership firm or other associations of persons is situated in India, it would be considered to be resident in India (Section 6 (2) of the Income Tax Act 1961). A HUF will be treated as not ordinarily resident if the manager of the HUF has not been resident in India in nine out of ten previous years proceeding that year and has not during the seven previous years proceeding that year been in India for a period or periods amounting in all to 730 days (i.e. 2 years) or more (Section 6 (6)(b) ). A company is said to be resident in India in any previous year according to Section 6(3) of the Income Tax Act if it satisfies any of the following two conditions (i) It is an Indian company, or (ii)During that year, the control and management if its affairs is situated wholly in India However any other person is stated to be resident in India under Section 6(4) of the Income Tax Act in any previous year, in every instance except where, during that year control and management of its affairs is situated wholly outside India. There is no distinction as far as non individual assessees are concerned between a resident and an ordinary resident. If a HUF or a company is registered in India during any previous year, it would also be considered as resident and ordinarily resident in India in that year. Note As the Foreign Exchange Regulation Act (FERA) has been repealed the definition under that act is no longer relevant.