What is NRI?

If you’re an individual who resides outside the geographical boundaries of India, ascertaining your legal status and how it affects your financial decisions can be daunting. 

After all, understanding whether you qualify as an NRI is imperative to determining the financial accounts you must open, the investment process you should adopt and the tax benefits you can avail. If questions such as ‘What is NRI?’ and ‘What is the definition of NRI?’ have been plaguing you, your search for answers is finally over.

Here, we discuss everything you need to know about NRIs, including the definition of NRI, the types of financial accounts for NRIs, and more.

Full Form of NRI and NRI Meaning

The full form of NRI is Non-Resident Indian. This is a term used to refer to an Indian citizen who resides beyond the geographical boundaries of India but continues to have strong ties to the country. 

As per the Foreign Exchange Management Act 1999 (FEMA) and the Indian Tax Act, resident Indians are individuals who:

• Have stayed in India for 182 days or more during the previous financial year, or 
• Have stayed in India for 60 days or above during the previous year and 365 days or more in the previous four years preceding the considered previous year

Individuals who don’t satisfy the above conditions are considered NRIs. 

When Is an Individual Considered an NRI? 

In order to be considered an NRI, you must fulfil the following criteria:

• Duration: You must reside outside India for 182 days or more during a financial year.
• Purpose of Foreign Residence: Your reason to stay abroad must be business, education, employment or any other legitimate reason that requires your prolonged absence from India.
• Intention of Foreign Residence: Your intention to reside abroad for an uncertain period also makes you an NRI.

Types of Financial Accounts for NRIs

NRIs cannot hold regular financial accounts like resident Indians. Instead, they can open the following types of financial accounts with financial institutions in India:

Non-Resident External (NRE) account

You can deposit income earned abroad in this account. The amount deposited and the interest earned are completely repatriable, with the interest earned being exempted from tax. Further, you can deposit funds in Indian currency and withdraw in foreign currency. 

Foreign Currency Non-Resident (FCNR) account

This account allows you to deposit your earnings and make withdrawals in foreign currency such as AUD, USD, CAD, SGD, etc. The deposited funds and earned interest are completely repatriable with the interest earned being exempted from tax.

Non-Resident Ordinary (NRO) account

With this account, NRIs can deposit income earned in India. The funds are completely repatriable to the country where you reside, subject to certain limitations. However, the interest earned is taxable.

Critical Taxation Rules for NRIs

Here are some rules NRIs must keep in mind:

• Income earned in India attracts tax liability.
• Income earned abroad is not eligible for tax in India.
• The salary earned by NRI crew members employed on foreign ships is not included in the total taxable income, even in cases where the salary amount passes to an NRE account of an Indian financial institution.
• Income earned in and outside India by individuals gaining the status of an Indian resident will be subject to tax in India.

Final Thoughts

In a nutshell, the definition of NRI or a Non-Resident Indian is an individual who has emigrated to another country for education, work, residence, etc. If you’re an NRI and seeking a reliable and trustworthy financial partner to manage your finances in India, look no further than Tata Capital Wealth. We offer a bespoke bouquet of financial services ranging from investment and protection services to financial services that help you drive your goals and objectives. Partner with Tata Capital Wealth and benefit from the Tata Group’s extensive experience of over 150 years to help manage your wealth efficiently. To learn more, visit Tata the Capital Wealth website today!