Full Form of NRI – Non-Resident Indian
Full-Form of NRI is a Non-Resident Indian, an individual who is a non-resident in India. A non-resident Indian, as defined under FEMA Act, is an individual of Indian origin, a person citizen of India, an overseas citizen of India, or a decedent of Indian who is staying outside the republic of India for the purpose of employment there, for a minimum period of 183 days during the preceding financial year as per the conditions mentioned to become a non-resident.
A non-resident Indian, in general terms, is the person, specifically an individual being Nonresident as per the conditions of residence in the income tax Act 1969 and is resident outside India for the purpose of employment. The fulfillment of conditions is checked for the preceding financial year to be a nonresident in the current financial year.
Categories of NRI
A Nonresident Indian can be categorized into the following:
#1 – Person of Indian Origin Not Being Resident of India
- A person of Indian Origin is a person either born in India, or either of their parents / Grandparents are born in non-partitioned India or is having an Indian passport. A person can also be termed as NRI if the spouse of such a person is an Indian citizen.
#2 – Overseas Citizen of India
- These foreign citizens have Indian origin, which authorizes them to stay and work in India for an indefinite time.
What are the Reasons for Becoming an NRI?
A lot of Indian public are migrating towards other countries like America, Canada, and the United Kingdom, etc. for various reasons like employment, earnings, business, education, etc. From those Indians, people who go there for employment purposes for a specific period of time or more than that, they become NRI. The following are various reasons for becoming a Non-Resident Indian:
- As per Income Tax Act: Accordingly, where a person doesn’t stay in India for 183 days or more OR a person either doesn’t say for 60 days in India or doesn’t stay for 365 days in the previous 4 years, then he will be considered as the NRI. The above condition is to be checked in the preceding financial year for gaining the status of NRI in the current financial year.
- As per Foreign Exchange Management Act: according to FEMA, a person is called a non-resident individual if such person does not stay in India for a period of 183 days or more for in preceding financial year.
Use of Term NRI
The term Non-Resident Indian is used in various fields in the economy.
- In various insurance contracts, it is compulsorily required to use the term Non-Resident Indian in case if the person insured is an NRI, because any country’s economy always has specific distinguished terms and provisions for NIR.
- Non-Resident Indian has various exemptions if the account opened is an NTO savings account.
- Further, the person’s taxability and deductions depend on whether the individual is a resident or a non-resident. Tax rates, the quantum of deduction, the period of taxability, and the level of exemptions are different for residents as well as a non-resident.
- Also, assessment proceedings are different for residents as well as NIR. Double taxDouble TaxDouble Taxation is a situation wherein a tax is levied twice on the same source of income. It usually occurs when the same income is taxed both at corporate as well as at the individual level. avoidance agreements between various countries are signed, providing special provisions for non-residents.
Some Precautions for NRI
The following things are to be taken care of if a person gains a status of Non-Resident Indian:
- Firstly, the Non-Resident Indian is required to convert their regular savings accounts into the NRO account, which gives various tax exemptionsTax ExemptionsTax-exempt refers to excluding an individual's or corporation's income, property or transaction from the tax liability imposed by the federal, local or state government. These exemptions either allow total relief from the taxes or provide reduced rates or charge tax on some items only. and privileges to that person. Also, such a Non-Resident Indian is not allowed to open a regular savings account. This account is required to be held jointly by the non-resident as well as the resident and is operated through the resident power of attorney in the country where such person is NRI.
- Assign power of attorneyPower Of AttorneyThe term "power of attorney" refers to a legal document that allows the holder to represent or act on behalf of the POA provider in business, private, or other legal matters. The grantor or principal of the POA is the person who grants the right. to the country where you are a non-resident to operate your accounts and other administrative projects.
- Update KYC details with financial instructions: financial institutionsFinancial InstitutionsFinancial institutions refer to those organizations which provide business services and products related to financial or monetary transactions to their clients. Some of these are banks, NBFCs, investment companies, brokerage firms, insurance companies and trust corporations. like banks, brokers, NBFC, mutual fundsMutual FundsA mutual fund is an investment fund that investors professionally manage by pooling money from multiple investors to initiate investment in securities individually held to provide greater diversification, long term gains and lower level of risks., insurance companies are compulsorily required to obtain KYC of each and every customer. Hence after obtaining the status of NRI, you are supposed to provide updated KYC.
- Convert fixed deposits into NRO deposits: if the bank in which FD is opened doesn’t convert this account automatically into NRO account, then various formalities are to be done from the side of NRI to convert the fixed deposit into NRO deposit.
- Convert debit or credit card into international cards for the purpose of making international payment and fund transfer from one country to another country.
Hence above precautions shall be taken into considerations while gaining the status of Non-Resident Indian.
The residential status of Non-Resident Indian is always non-resident in the country of India. To decide whether a person is a resident or NRI, the provisions of the Income Tax Act 1961 are used for determining the residential status that should be taken into consideration. When none of the conditions of ordinary residents or residents are met, then the person is called non-resident.
Different Types of NRI Accounts
The following are the various types of Non-Resident Indian accounts.
- Non-resident Ordinary (NRO) saving account
- Non-Resident External (NRE) saving account
- Non-Resident Ordinary (NRO) fixed deposit accounts
- Non-Resident External (NRI) fixed deposit accounts.
- Foreign exchange Non-resident Fixed Deposit account.
Thus discussed, the status of a non-resident is gained by the provisions of the act enacted under the Indian economy; after considering those provisions, a person is stated to be NRI or a resident Indian. Further of such a person moves out of India to another country’s reasons like employment it education business extra. After obtaining the status of Non-Resident Indian, the above-mentioned precautions should be given atmosphere importance so that financial and other transactions can be Run smoothly and direct tax benefitsDirect Tax BenefitsTax benefits refer to the credit that a business receives on its tax liability for complying with a norm proposed by the government. The advantage is either credited back to the company after paying its regular taxation amount or deducted when paying the tax liability in the first place. can be obtained, and the non-resident Indian can also obtain the relief mentioned under DTAA.
This has been a guide to the Full form of NRI, i.e. (Non-Resident Indian) and definition. Here we discuss reasons for becoming a Non-Resident Indian along with its Uses, precautions, and categories. You may refer to the following articles to learn more about finance –