A Non-resident Indian (NRI) is an individual who holds Indian citizenship or is of Indian origin but does not reside in India. To determine whether someone is an NRI, their residential status must be assessed according to the provisions of the Income Tax Act.

Section 6 of the Income Tax Act defines the criteria for determining an individual's residency status. An individual is considered a non-resident in India if they do not meet the residency requirements stipulated in the Act.

These residency requirements involve the duration of the individual's stay in India. According to Section 6 of the Income Tax Act, an individual is deemed a resident of India in a particular year if they meet either of these conditions:

Condition 1: They have been physically present in India for a period of 182 days or more during that year.

Condition 2: They have been physically present in India for a period of 60 days or more during that year and for a total of 365 days or more during the four years preceding that year.

However, the period of 60 days specified in (2) above is extended to 182 days for Indian citizens and persons of Indian origin who visit India during the year. This concession also applies to Indian citizens who left India in the previous year as crew members or for employment abroad.

The Finance Act, 2020, effective from Assessment Year 2021-22, amended this exception. For Indian citizens or persons of Indian origin whose total income, excluding income from foreign sources, exceeds Rs. 15 lakhs in the previous year, the 60-day period in (2) is now replaced with 120 days. Income from foreign sources refers to income earned outside India, excluding income generated from a business controlled or a profession established in India.

The Finance Act, 2020 has introduced a new Section 6(1A) to the Income-tax Act, 1961. This provision clarifies the residency status of Indian citizens. An Indian citizen will be considered resident in India if their total income, excluding foreign sources, exceeds Rs. 15 lakhs during the previous year.

Income from foreign sources refers to income that originates or accrues outside India. However, income from a business controlled in India or a profession set up in India is excluded from this definition.

To be deemed a resident of India under this provision, the individual must not be liable to tax in any other country or jurisdiction based on domicile, residence, or similar criteria. This means that Indian citizens earning over Rs. 15 lakhs (excluding foreign sources) and not paying taxes elsewhere will be considered Indian residents for tax purposes.

A person is considered of Indian origin if they, their parents, or grandparents were born in undivided India. This determination is relevant for determining residency status and other tax-related matters.

Written By: Md.Imran Wahab, IPS, IGP, Provisioning, West Bengal
Email: [email protected], Ph no: 9836576565