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Old 12th October 2008, 17:06   #1
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Default Am I an NRI?

Hello Guys,

I will be leaving India for employment abroad by end of this month. I am not sure how long it will be, but definitely it will be more than 3 years. I am trying to figure out how and when I will get an NRI status.

Referring to this article Are you an NRI?, I found that the applicable clause for me is
Quote:
2. An Indian citizen leaves India for the purpose of employment, business, education, stay with parents/ children, with the intention of staying abroad for an uncertain period. In such cases, he becomes a NRI the moment he leaves India, even if he has not stayed abroad for 182 days or more during the financial year.
Now some very basic questions:

1. Does this mean I will be given an NRI status for FY2008-09 (current financial year)?

2. How and where should I declare than I am an NRI? Is it only during accessment that I have to mention that I am an NRI?

3. If I get an NRI status, should I close my savings accounts in India and open NRI accounts? Will it be illegal to transfer money to non NRI savings accounts?

NRIs here... Please help me with this.

Nirmal
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Old 12th October 2008, 17:26   #2
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law.incometaxindia.gov.in

Please take a look through this link. The rules are very clear and in black&white.

You would be treated as a Resident for this FY (only for your income gained in India) IMHO.
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Old 12th October 2008, 17:48   #3
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Quote:
Originally Posted by nirmalts View Post
...

1. Does this mean I will be given an NRI status for FY2008-09 (current financial year)?

2. How and where should I declare than I am an NRI? Is it only during accessment that I have to mention that I am an NRI?

3. If I get an NRI status, should I close my savings accounts in India and open NRI accounts? Will it be illegal to transfer money to non NRI savings accounts?
...
1 & 2 : There is no one who is going to give you a 'NRI' status as such. You pay tax in India for the amount of salary that you have earned here in India. The status, as such, or we can term it as the benefit with this status, is applicable only if one stays in another land for more than 180 days, continuosly. This is mainly used and applied when you bring back stuffs to India. Apart from that, nothing much special, AFAIK.

3. NO; it is not illegal. With an NRE account you can take up a draft and move money back to this Indian account. The rate of interest is high, so you will have to prove to the bank that you are moving out and require such an account. But, apart from that, you can move money from your foreign bank to the local Indian banks savings account. If you have an ICICI account, you can very well do it using their MoneyToIndia service. I did that quite a lot, for moving my salary from my BOA to my ICICI salary account. And for my IOB NRE account, I used to take drafts from 'UAE Exchange'.
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Old 12th October 2008, 18:05   #4
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Originally Posted by Steeroid View Post
redirect

Please take a look through this link. The rules are very clear and in black&white.

You would be treated as a Resident for this FY (only for your income gained in India) IMHO.
Thanks Steeroid for the link. The tax laws looks complex to me. I am trying to find out when I will get an NRI status if I leave the country now.

I am taking financial year (FY) as 2008-09 and Assessment year (AY) as 2009-10. During FY, I would have stayed in India for 207 days.

Under Income Tax Act, to become a non-resident,

a) The person is not be in India for 182 days or more during the relevant previous year (that is FY 2008-09). -> I will not satisfy this as I stayed more than 182 days

b) The person is not in India for 60 days or more during the previous year and he is not in India for 365 days or more during the 4 years prior to the previous year. -> I will satisfy the first part (as I am out of country for more than 60 days), but I will not satisfy the second part (as I have stayed in India for more than 365 days in the 4 years before FY 2008-09)

Since I do not satisfy the above 2, I will not get NRI status for AY 2009-10. I will get an NRI status in AY 2010-11, provided I stay in India during 2009-10 for less than 60 days.

Is my understanding correct?

Nirmal
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Old 12th October 2008, 18:11   #5
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Quote:
Originally Posted by nirmalts View Post
b) The person is not in India for 60 days or more during the previous year and he is not in India for 365 days or more during the 4 years prior to the previous year. -> I will satisfy the first part (as I am out of country for more than 60 days), but I will not satisfy the second part (as I have stayed in India for more than 365 days in the 4 years before FY 2008-09)
The law states AND. Therefore you have to satisfy both conditions.

Quote:
Originally Posted by nirmalts View Post
Since I do not satisfy the above 2, I will not get NRI status for AY 2009-10. I will get an NRI status in AY 2010-11, provided I stay in India during 2009-10 for less than 60 days.

Is my understanding correct?
No you will be a non-resident for FY 2009-10 (AY 2010-11) only if you are out of the country for > 182 days in that Financial Year. The 60-day rule is only applicable if you satisfy both rules (outside India for 60 days or more in the last year AND for 365 days or more in the 4 preceding years).

My accounting & taxation are rusty, though - its been over 14 years since I left that field. You'd better speak to a practicing CA and not an ex like me. This is a rather simple part of their job.
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Old 12th October 2008, 19:42   #6
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here is what i can add for you
the income tax section dealing with the residential status of an individual is section 6.
acc to this a person is resident in india if any of the two conditions are satisfied

1.the person is in india for a period of 182 days or more
2.if the person is in india for a period of 60 days or more in the previous year and 365 days in the 4 immediately preceding years.

now employement is considered as an exception to the above rule:
the rule for employement outside india is
1.if a citizen of india leaves the country for employementthen he is resident in india if he stays for a period of 182 days.

now your 182 days will be completed on (30+31+30+31+31+30=183 DAYS ON 1ST OCT 2008)

I HOPE THIS HELPS

Last edited by ankit.jhamb : 12th October 2008 at 19:45.
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Old 12th October 2008, 20:38   #7
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It's simple : you are resident for this FY. Next year, you will be a NRI.
This year, you are spending more than 182 days INSIDE the country. Next year it will be almost 0.

Note what Steer has said - the condition has an "AND" clause.


This year's India tax returns will continue as usual. But your earnings over the last 7-8 months will be calculated as if it were for the full 12 months, and hence you will pay less tax this time.

You can continue to maintian your savings accounts - keep only residence address on record - in your case, your parent's address should be good. Maintain it in operative status by doing atleast a small deposit from another local account - may be your parents' accounts

Use a separate NRE/NRO account for your transactions going forward, till you return.
This will possibly be a NR-NR (non-resident, non-repatriable) account where you may not be able to transfer money out of India - you will not even be able to deposit INR into this account from here, but can transfer the money from outside into this account.
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Old 12th October 2008, 22:36   #8
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NRI for income tax
NRI for Fores (FEMA)
NRI for other purpose (may vary - like voting).

Definition is different. (may be common norms - not likely - but norms are different, AFAIK). Places where the definition is made is different.

So, the question is, NRI for what purpose?
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Old 13th October 2008, 07:02   #9
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Thanks guys. That was lot of useful into.

There are 2 clauses from Income Tax Act (mentioned above) which is clear now. Another 2 from FEMA. One of them from FEMA is still confusing to me.

Quote:
2. An Indian citizen leaves India for the purpose of employment, business, education, stay with parents/ children, with the intention of staying abroad for an uncertain period. In such cases, he becomes a NRI the moment he leaves India, even if he has not stayed abroad for 182 days or more during the financial year.
Quote:
Originally Posted by ankit.jhamb View Post
now employement is considered as an exception to the above rule:
the rule for employement outside india is
1.if a citizen of india leaves the country for employementthen he is resident in india if he stays for a period of 182 days.
@Ankit: I guess you too have quoted this as an exception. How is this applicable for me is my confusion ?

Nirmal
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Old 13th October 2008, 09:48   #10
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sorry if this is OT,
but which is good bank to open an NRE account with so that the remmitance charges are very little. i will be moing o Australia. shortly
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Old 13th October 2008, 10:51   #11
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Quote:
Originally Posted by nirmalts View Post
Thanks guys. That was lot of useful into.

There are 2 clauses from Income Tax Act (mentioned above) which is clear now. Another 2 from FEMA. One of them from FEMA is still confusing to me.





@Ankit: I guess you too have quoted this as an exception. How is this applicable for me is my confusion ?

Nirmal
what i meant was that since you are going out of india for employement,it is considered as an exception in income tax.in your case the defination given in the income tax rules will be valid.
for this year you have already completed your 183 days on 1st oct,so you you are a resident in this particular yr.
i have just given you the exact rules,we are doing this subject and there are similar cases like you have mentioned.
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