Non-Resident Indian, more popularly known as NRI is defined in the Foreign Exchange Management Act (FEMA), 1999 and the Income Tax Act, 1961.
NRI means a person who is not resident in India. NRI is defined in section 6 of the Income-tax Act. It is necessary to learn the definition of a resident to understand the meaning of NRI.
If a person goes out of India for his employment, business or for any other purpose which proves his intention to stay beyond the boundaries of India for a period which is not certain; then he becomes a non resident from the day of leaving India for the said purpose. The term “NRI”, normally, denotes a non-resident who can be an Indian Citizen residing outside India. The term also includes Citizen of Foreign countries of Indian origin residing outside India.
Again a person of Indian Origin (PIO) is defined in the FEMA.
The residential status of a person depends upon how long he stays in India. It is counted in number of days per financial year starting from 1st April to 31st March .It is called the previous year according to the Income-tax Act.
Tax liabilities of a NRI:
The Income Tax Act, 1961 provides that the tax liability of a person returning India depends upon the Residential Status of a person.
Any type of Foreign exchange or any overseas asset such as properties, bank deposits, securities, insurance policies, loans, any type of deposits, bonds etc. acquired, or owned by an NRI during his stay at abroad can be held by him and dealt with in any manner after his return to India for permanently residing in India.
The interests paid by some specified banks to Non Resident Indian or to a person who is not ordinarily resident on RBI approved foreign currency deposits are exempt from tax in India.
If a NRI is supposed to get pension from his former employer after returning to India, it may be taxable in India.
Assets situated outside India belonging to a NRI are exempt from Wealth Tax in India.
When a NRI returns to India for permanently residing in India, the assets he brought along with him will be exempt from tax. The cash money and the assets acquired from them, brought by him within one year of his return to India, will be exempt too. This exemption is applicable for seven years after he returns to India.