The NRI status is a critical aspect of an Indian citizen’s life if he is living and earning abroad. His NRI status will determine what kind of rules he will be in filing the taxes and schemes and the documentation to apply to him. This comprehensive guide will cover all that is required to know about NRI status eligibility to acquire, how to apply, documents required, rules and regulations of taxation for NRIs, and anything else you want to learn. The guide clears the air about the NRI status and proves essential to every Indian staying abroad who wants to understand the NRI benefits or is thinking of going abroad and would like to prepare for the same. Continue reading to understand all facets of this very important topic.
Eligibility to NRI status in India
Eligibility for NRI status in India depends upon the individual's stay in the country. According to the Indian tax laws, a person is eligible for the NRI status if:
- You have stayed in India for less than 120 days during the financial year.
- You have stayed in India for less than 365 days during the four financial years preceding the year.
In simpler terms, if you are an Indian citizen and have stayed abroad for 182 days or more in the previous financial year, you can receive NRI status. Your period of stay in India is counted in terms of the number of days in the country and not the number of trips made.
Some key rules governing NRI status eligibility are:
- Your intent to either return to India or be a permanent resident of any other country comes secondary to your eligibility.
- Short visits to India, for example, vacations, family functions, or business purposes, shall not be considered.
- The stay eligibility criteria are also applicable to students going abroad for studies.
Learn how NRI can invest in mutual funds in India.
NRI Status Calculator
With different minimum stay requirements in India and abroad, it can be hard to tell if you are qualified for NRI status. Luckily, you can now find online NRI status tools that do the maths for you and are easy to use.
These NRI qualifying tools only need information about your travels, like when you left India, how long you stayed in India when you plan to return, etc. Once you enter these numbers, the tool will figure out how many days you have been in the country in the last fiscal year and over the last four years.
Applying for NRI Status?
No such procedure exists in the application for NRI status.
If you meet the pre-set conditions for eligibility, you receive it automatically. However, while applying for an Indian visa, opening an NRI bank account, or buying property in India, there could be some paper formalities while establishing your NRI status. Some of the NRI Status documents required to apply for the benefit under NRI status are:
- Proof of overseas address, either a rent agreement, utility bills, etc.
- Certificate of Overseas Employment
- Bank statements showcasing deposits and withdrawals in Indian as well as foreign banks
- Indian and foreign passports with visa stamps
- Income tax returns of the country of stay
- Proof of stay in India through exit/entry stamps, flight tickets, etc.
With most Indian banks, the NRI account can be opened with overseas proof of address and passport copy only if the person is an account holder of that bank. If you are buying a property, you might be required to attach employment contracts, salary slips, etc., as per the bank's requirement.
Taxation Rules for NRIs
The varied taxation rules that apply to an NRI differ from those applicable to resident Indians. Some of the key pointers when it comes to NRI taxation are given below:
- Taxes are leviable on the India-sourced income of NRIs in India. This includes income from investments, property, and capital gains on the sale of assets, etc.
- The income earned abroad would not be taxable in India. But the income is more likely to be taxable under the laws of your own country of residence.
- NRIs must pay tax on NRI accounts and FCNR deposits for any interest income.
- Short-term capital gains from Indian assets/investments shall be taxed at 15%.
- Long-term capital gain exceeding INR 1 lakh will be chargeable at 10%.
- TDS on various incomes like rent, interest, sale of property, etc.
- NRIs must file their Indian income tax returns every year before the end of July.
- Treaties under double taxation avoidance apply when the NRI intends to avoid double taxation of the same income.
- NRIs are eligible for a basic tax exemption of Rs 2.5 lakh annually.
Carefully reviewing the NRI taxation rules and claiming all deductions/rebates can help reduce your overall tax liability. Consulting a finance professional can help maximize your tax savings. You can also use online calculators to ease your tax filings.
Benefits and Privileges of NRI Status
There are many benefits and privileges that an NRI enjoys, such as:
Having special accounts called NRE and NRO make it very easy to repatriate funds abroad.
- Easier purchase or sale of property in India than foreigners.
- PIO and OCI cards are entitled to certain benefits, like an Indian passport.
- Easier grant of loans, credit cards, and all other banking facilities in India.
- Income earned abroad is not taxed, and there are lower TDS rates of 10-15%, etc.
- Portfolio Investment Scheme for more accessible investment in Indian markets and securities.
- Benefits of citizenship of India to children born outside India.
- No need for an Indian work permit or license for staying abroad or foreign remittances.
- Travel and stay benefits – multi-entry visas, exemption from registration formalities for visits up to 180 days.
- Special education schemes and scholarships for NRIs & children.
- Economic benefits as per NRI marriage laws and laws of property inheritance With NRI status, the economic benefits accruing from and to India in terms of financial and legalities can continue to be availed of even after a span of years have been spent by the person in staying overseas. It is a lifetime connection, so to say, with the Indian system.
Conclusion
NRI status broadly impacts your options of living, working, and investing in India and overseas. Understanding eligibility criteria, the application process, tax rules, and the benefits attached can help you leverage the potential of having NRI status. Being an Indian expatriate, knowledge of all the opportunities one still can access through the NRI status, along with its limitations, can help in planning your finances and future optimally. The topics summarized in this guide would help Indian citizens understand this all-important topic 360 degrees for them to take on global careers and lifestyles properly.