When you read the title The Reluctant NRI, the first question that may pop for those who do not know is, What or who is an NRI?

Before I convey anything else on this blog, I thought I would get that question out of my way by beginning to understand the meaning of NRI. Not just the full form of it but the nuances and the weight that comes attached to it.

NRI stands for Non-Resident Indian. It speaks for itself, but what does it stand for legally? What are the implications?

I explore this term and try to understand it as I join the category myself. You can find the same in this article.

Who is an NRI?

NRI literally means Non-Resident Indian. It speaks for itself, doesn’t it?

Indian law defines NRI differently for different purposes.

Definition according to Foreign Exchange Management Act (FEMA):

Any person who is a citizen of India or a Person of Indian Origin is an NRI if the person is residing outside India for an uncertain period for the purpose of employment, business, or vocation.

FEMA requires 183 days of non-residence to earn the NRI status.

Definition according to Income Tax Act (IT Act):

There are three types of residential statuses for an assessee for tax purposes.

Resident and Ordinarily Resident (ROR)
Resident and Not Ordinarily Resident (RNOR)
Non-resident Indian

Though there is no descriptive definition for an NRI, for taxation purposes, the Income Tax Act defines an Indian Resident as:

A person who has been in India for 182 days or more during the previous year (the previous year referring to the previous financial year for which the tax is assessed), or
A person who has been in India for 60 days or more in the financial year and has lived there for 365 days or more in the four years immediately preceding the said financial year.

While this is how an Indian resident is explicitly defined, the Act defines NRI as an individual being a citizen of India or a person of Indian origin who is not a “resident.” That is, anyone, though an Indian citizen, who falls outside the categories described above, is implied as a Non-Resident Indian.

RNOR refers to the NRIs who have returned to India after residing abroad.

What does holding an NRI status mean?

A person holding NRI status enjoys certain advantages but not without limitations.

The advantages enjoyed by an NRI are:

Any income earned by NRIs outside India is not taxable unless the payment is received within India (though they may be taxed by the country they are earning it in).
They can open different NRI accounts to avail benefits.They can avail tax benefits on NRE and FCNR accounts.
They can avail tax benefits on home loans.
NRIs can vote in Indian elections.
Indian education system offers special reservations for NRIs and their children (you may have heard the infamous term NRI quota).
They can have employment opportunities in a foreign country while holding an Indian passport

The limitations are:

NRIs cannot acquire any agricultural land within the territory of India.
Any income earned by NRIs in India is taxable.
NRIs cannot hold resident savings account in India. According to the Reserve Bank of India Guidelines, an NRI cannot operate resident savings account for financial transactions in India after the residential status changes. The account must change to an NRI account.

There are a couple of other words that are closely related to the term NRI. They are PIOs and OCIs. Let us understand those too.

Who is a PIO?

PIO means a Person of Indian Origin.

A person of Indian origin may be a foreign citizen, holding a foreign passport, but who may have held an Indian passport at any time or whose ancestors (parents, grandparents, etc) may have been Indian nationals.

Reserve Bank of India defines a PIO as a person who is residing outside India, and is a citizen of any country other than Bangladesh or Pakistan or a any such country as specified by the Central Government of India, and falls under either of the following categories:

Was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955, or
Belonged to a territory that became a part of India after the 15th August, 1947, or
Is a child or grandchild or a great-grandchild of a citizen of India or of a person that falls under clause (1) or (2), or
Is a spouse of foreign origin, of an Indian citizen, or the spouse of foreign origin of a person that falls under either clause (1), (2), or (3)

Who is an OCI?

OCI means an Overseas Citizen of India.

The Constitution of India provides its citizens for only single citizenship. It means all those who are citizens of India and hold an Indian passport cannot hold any other country’s passport simultaneously. But with the growing demand for dual citizenship among the Indian population, the Overseas Citizen of India (OCI) card was introduced under the Citizenship Act, 1955.

However, OCI does not mean dual citizenship, nor does it confer any political rights. Those who are registered as OCI shall also not enjoy the rights of an Indian citizen under Article 16 (Equal opportunity in matters of public employment).

A person eligible for an OCI card is a foreign national (except a citizen of Bangladesh or Pakistan) who was eligible to become a citizen of India on 26th January, 1950, or was a citizen on or after 26th January 1950, or belonged to a territory that became a part of Indian after 15th August 1947. Even minor children of such persons are eligible for an OCI card.

What are the benefits of holding an OCI card?

OCIs enjoy the right of multi-purpose, multi-entry, and a lifelong visa allowing them to visit India at any time and for any purpose, and for any length of time.

They have been granted all the rights in economic, financial, and educational fields, just like NRIs, except the right to acquire agricultural land

Conclusion

That was some information about the NRI status. I did not want to get into details of the legal aspects of it here. I merely intended to introduce the term NRI and what it means.

If you have any questions, you can leave them in the comments. I shall reply to them to the best of my knowledge, or maybe write articles if they require in-depth explanations.

FAQ

Are international students NRIs?

Yes, under the Foreign Exchange Management Act (FEMA) an international student is also an NRI as soon as he goes abroad to study.

How many days should an NRI stay in India to maintain NRI status?

As per the definition in law, NRI is a person who is residing in India for less than 182 days. A person has to stay for less than 182 days in a given financial year to maintain the NRI status.

What happens to NRI status once you return to India?

The person loses NRI status after residing in India for more than 182 days. If a person has resided abroad for a length of time and then returned to India then the status of RNOR is acquired which means Resident Not Ordinarily Resident.

Who is an NRI? Understanding Indians living abroad