Who is an NRI – As per Income tax and FEMA. Important Rules?

definition of NRI - non resident indian

Your Residential status is important to understand as it determines your taxability in the country. Many think that once they move out of India they become NRI, and also when they come back they will be treated as Indian Residents. But that is not true.

There is a specific definition and calculation, depending on the number of days of stay in India which determines your residential status.

The definition of NRI is different as per the Income-tax Act and FEMA (Foreign Exchange Management Act) perspective.

Where the IT act is meant to figure out the taxation, FEMA takes care of the transactions and Investments. The opening of bank accounts (NRE/NRO), Buying shares, mutual funds, agricultural land, etc. is under FEMA Purview. So, understanding of Both the definition is important. (Also Read: Everything you wanted to know about NRI Bank Accounts)

Let’s try to understand the different residential status and what makes NRI an NRI.

Who is an NRI (Non Resident Indian) – As per Income tax act

Tax liability in India is directly determined by the residential status of the assessee under Income tax act. There are 3 statuses:

  1. Resident and Ordinarily Resident (ROR)
  2. Resident and Not Ordinarily Resident (RNOR) and
  3. Non-Resident Indian (NRI)

RNOR is generally applicable to the Returning Indians. The tax liability of NRI and RNOR remains the same as far as the foreign income is concerned. (Read More on RNOR Status here)

NRI is the person, who should not be in India for at least a period or periods amounting in all to –

  1. 182 days in the FY and
  2. 365 days out of Preceding 4 FYs and 60 days in the Previous FY (Year for which we are checking the status)

Both the above conditions need to be satisfied for one to be called as NRI

If the person satisfies any of the 2 conditions above then he will be treated as either ROR or RNOR as the case may be.

In other words, a person will be called as ROR (Resident and Ordinary Resident) is he/she satisfies any of the above/below mentioned conditions:

If a person stays in India for at least a period or periods amounting in all to –

  1. 182 days in the FY or
  2. 365 days out of Preceding 4 FYs and 60 days in the Previous FY (Year for which we are checking the status)

There are 2 exceptions to this.

Where an Indian citizen leaves India in any year for the purpose of employment, or as a member of a crew of an India Merchant ship, the period of 60 days is to be replaced by 182 days. (read: How Mutual funds taxations differs in case of NRIs)

Also, when an Indian citizen residing abroad comes to visit India, then also the 60 days condition will be replaced by 182 days. But if the person visiting India has Income in India exceeding Rs 15 lakh then the 182 days condition be replaced to 120 days. This is w.e.f April 1, 2020, and is as per Finance Bill 2020

However, for those who return to India permanently (not on a Visit), the Condition of 60 days is not replaced by 182 days.

Let’s understand these with some examples

  1. Rahul a software engineer has been assigned to a project in the US and he has left for the US on 1 September 2017 for an uncertain time. Now for FY 2017-18 what would be his Residential Status? NRI or Resident India?
  2. Suresh Kumar a retired bank officer, every year pays a visit to his daughter who lives in US and Son who is in Australia. He stays with both of them for 3 months each? In FY 2017-18 also he went on both the trips. Will that make him an NRI?

Solution 1-- Rahul left India on 1st September 2017, which means his stay in India for FY 2017-18 was 153 days. So, he does not satisfy the first condition of being a Resident. (Or satisfies the first condition of being a Non-Resident)

Since he went for employment purpose, so the second condition has to be seen by replacing 60 days with 182 days. And in this case, though Rahul was in India for more than 365 days in the last 4 preceding years but was not in India for 182 days in the FY for which we are finding his residential status. Thus, he is not satisfying the second condition of being a Resident.

This means that Rahul Residential Status would be an NRI for FY 2017-18

Solution 2 – Suresh Kumar was out of India for 6 months’ time. Means he must have crossed the 182 days limit. This means that he is an NRI looking at the first condition.

But in this arrangement, he was in India for more than 365 days in the preceding 4 Financial Years, and also was in India for more than 60 days in the year for which we are finding the residential status. This means he does not satisfy condition 2.

(Try this Income tax Residential status calculator)

To count as NRI you have to satisfy both the conditions and for ROR any of the 2 conditions. Thus, Suresh will be treated as Resident and Ordinarily Resident

(Also Read: TDS on NRI investments)

Besides the days of stay conditions, in Budget 2020, Indian Government has also added a new section 6(1A) to income tax act which says that the Indian Citizen who is not Tax Resident of any other country and earning Rs 15 lakh and above in the previous year from the other than Foreign sources will be treated as Resident of India

What is RNOR – Resident but not ordinarily resident?

RNOR is the third status which is considered to find out the tax liability of the person. This status generally applies to the returning NRIs who are coming back to India after living abroad for a considerable time.

To mitigate the shock of an NRI suddenly becoming Resident, after returning to India permanently RNOR is a transitional status.

An RNOR is an Individual who –

  1. Has been an NRI in 9 out of the 10 previous years preceding to that year, OR
  2. Has, during the 7 previous years preceding that year, been in India for a period of, or periods amounting in all to 729 days or less.OR
  3. An Indian Citizen, who is not a tax resident of any other country, and having a total income of Rs 15 lakh and more (Excluding income from foreign sources)OR
  4. An Indian Citizen, or a PIO, having Income in India of Rs 15 lakh or more (Excluding Income from foreign sources), and the period of stay in India was 120 days and more but less than 182 days.

One of the above 4 conditions needs to be satisfied to be eligible to be construed as RNOR. Please do note that one condition is of your tax status and the other is on your stay in India.

It would be confusing to calculate but this all taxation is about?

This means that :

-Those returning India after being NRIs for 5 continuous years or less, immediately become Residents as they won’t be able to satisfy any of the 2 conditions.

– Those returning India after being NRIs for 6 continuous years may become RNOR for one year, provided he/she had not visited India in all those years

– Even those who after being NRI for a considerable time say 15-20 years, may become RNOR but for 2 years at the most. In rare cases, a person can become RNOR for 3 years.

(Read our Detailed Article on the RNOR Status)

Who is an NRI (Non-Resident Indian) – As per FEMA (Foreign exchange management Act)?

FEMA governs the money transactions. Investments, borrowings, Forex transfers, etc. You may become NRI after completing a specific number of days in India/abroad as per IT Act, but FEMA goes on the Intention of the person or entity to call it as Resident or Resident Outside India. It does not use the term NRI

As per Section 2(v) of FEMA resident mean –

A person residing in India for more than 182 days during the course of the preceding financial year but does not include,

  1. A Person who has gone out of India or Who stays outside India in either case for the following 3 purposes –

a)For or on taking up employment outside India or

b) For carrying on a business or vocation outside India

c) For any other purpose, in such circumstances, as would indicate his intention to stay outside India for an uncertain period

2. A person who has come to or stay in India, in either case, otherwise than the following 3 purposes:

a) For or on taking up employment in India or

b) For carrying on a business or vocation in India

c) For any other purpose, in such circumstances, as would indicate his intention to stay in India for an uncertain period

If you look at both IT and FEMA definitions, you will find that in IT act person will be Resident or Non-resident for the complete Financial Year, whereas in FEMA one can be resident for the part of the year and Resident outside India for another part.

Take for instance of a person who goes abroad for the first time on 15.1.2017. For ITA he is the resident for the FY 2017-18, but if he has gone for any of the 3-purpose mentioned above then he becomes ROI the day he Leaves India.

(Also Read: Financial planning for Non Resident Indian)


Well, frankly there is nothing to conclude as this is the law and we cannot do anything about it? It may be confusing to those who keep on travelling between countries and also have businesses in multiple countries. But those people generally have a team of experts to take care of this. (Read: Taxation of NRE Fixed deposits on Returning NRIs)

Sometimes I wonder, even if someone becoming a Non Resident Indian means he may not have to pay tax in India on his foreign Income but he is still paying taxes in his tax resident country, thus there is no tax saving as such unless one goes to some gulf country where there are no Direct taxes as of now.

Even in case of Investments like FD. NRE FD interest is tax-free in India, but it may be taxable in the country of tax residency.

But still, this is what the law says which we have to be aware of and follow as such.

One who is going abroad for employment may not fall into IT act rules for NRIs immediately, but he/she has to follow the FEMA guidelines and Open the NRE/NRO accounts, Inform the Depository participants, Mutual fund houses, etc. about the changed status to be on the right side of law always.

Also Check- 10 Important things to do before becoming an NRI

Disclaimer: I am not a tax expert. The above article is as per my limited knowledge and understanding after reading different books and articles on this subject. So, it is advisable not to make any decision based on the above content. Do consult some tax expert

Still, if there are questions. I would try to answer.


  1. hello sir if I stay more then 180 out of india, but I filling ITR regularly then sir I get any problem in immigration in india to clear
    stay out of india more then 180 days but not NRI

  2. Dear sir, I am a retired person of 7 years old was in India from 2005 Nov till 2016 May and made on 6 months visit to my son in USA 3 or 4 times 2006 to 2010. In 2016 May my visit visa expires and hence I made a final visit during which time my son applied for GREEN CARD to live with him. After applying I returned back to India on Advance Peroll for 1 year. I got my GREEN CARD allowing me PERMANENT RESIDENT from 14th Sept.2017 till 14.09.2027 for 10 years under category IRO. i HAVE COME ONLY TO STAY WITH MY SON FOR 10 YEARS AND NOT FOR EMPLOYMENT OR FOR ANY MONETARY BENEFIT. Am I NRI or RESIDENT NOT ORDINARY RESIDENT OR RESIDENT. In USA Govt rules changes and at any time they may waive GCs ALSO like they are likely take back H4 visa for the spouse of HIB visa holders. Please write my status? Best regards SRINIVASAN SUBRAMANIAN

  3. There is an Non resident indian employee in indian company working in USA and service is rendered outside india does the indian company has to tax it or it should be exempted from tax?

    • If a person is Non-Resident then no income tax to be deducted on the income earned outside India. Income tax applies to NRI only if the income earned or accrues in India. In your case, on the face of it, the income is earned on the services rendered outside India so it should be treated as Income earned out of India.

  4. Dear Sir,
    Thanks a lot for clear explanation on Residential status with examples.

    I am working for Oil field company in Basra, Iraq. My job nature demands 28/28 On/Off. It means after deducting travelling days, my period of stay in India comes around 175-180 days in a financial year.
    Because of Covid-19 situation, I returned from Basra, on mid of March 2020. I am waiting for Normal situation to go back to work. Till date, I am working from home (from India) for the same company. Now my salary is being credited to my NRE account for the service rendered to the company located outside India.

    1) In Financial Year 2020-21, what will be my residential status (in case if I am staying in India till December 2020 due to Covid-19 situation)?
    2)Is my foreign income taxable in India?
    3)Is there any guidelines given by CBDT on this Covid-19 restriction?

    Thanking you Sir,
    Kind Regards,
    Hariharan Arunachalam

    • Hello Hariharan
      The answer to your question lies in your Residency status in past years. If you stay till December 2020 may attract 183 days rule, but to me, it seems that you must be satisfying the RNOR criteria, as mentioned in the article.
      If yes, then your salary though being received in the NRE account will not be taxed in India.
      For Covid 19 the only guidelines issued were regarding not going back due to cancellation of the air travel. https://www.business-standard.com/article/economy-policy/covid-19-relief-for-nris-foreign-visitors-as-tax-residency-rules-eased-120050900066_1.html
      This is a unique situation worldwide. See, since your being a resident in India would not be by choice but forced upon you by the situation, so if you do not fall in RNOR rules then you may get the relief by appealing to the assessing officer. Still, I would suggest you better be in touch with your Chartered Accountant, so help you in the appealing process if required., and may guide you better in today’s situation and tax rules.
      In any case, your intention is to go back as and when the work calls you, so as per FEMA you will be an NRI only.
      Hope this answers your query.

      • Thanks a lot Sir for clear explanation and guiding for the Way forward !!!
        Kind Regards,
        Hariharan Arunachalam

  5. Hi My name is Josemon Skaria, An NRE from Kerala, at present Ia m working at Muscat, I need your advice to invest my money which I can get maximum return with NRE protection and no risk

    • Hi Josemon, I would be glad to advise you, but I am afraid, I can’t fulfil the condition of “Maximum Return”, with “No Risk”. In fact, this is not the right expectation. There’s no such product, which can get you both this. It’s always wise to be aware of the risk and take the calculated call. Nothing is devoid of risk…don’t fall into a missellers trap who promise you to provide with both .
      In case you would like to discuss further, you may email me at [email protected]

  6. Hello sir, I am a nurse working in Saudi Arabia from June 2020. Can you please let me know if I fall under the category of NRI.
    Also, if i won any prize money out of any lottery conducting in middle east (like Abu Dhabi Big ticket) will that be taxable in India?


    • Hi Binoj,
      Since you have moved abroad for employment purposes and had already spent 182 days there then you would be considered an NRI and you do not have to pay taxes on your foreign income in India but do check the taxation in your country of residence.

  7. Hello,
    I have moved to the US on a green card in Sept 2019. I have business both in the US and India. I have stayed less than 179 days in India in FY 2020-21. My income in India is greater than 15 lacs for FY 2020-21. I do not satisfy the 2nd condition of the IT act for NRI as my stay in India is more than 365 days in the last 4 years.
    I visit India often and I am unclear on my NRI status. Can you guide me for the following,
    a) Do I report my US income in India and pay taxes on my US income?
    b) How many days in a financial year can I stay in India?
    Thank you,

    • Hi Jay,

      Since you do have business in India and your income in India is more than 15 lakhs, the first condition would be that your stay in India shall not exceed 120 days to be considered as an NRI. You may check your status from the income tax website link shared below by entering your stay details in India. This would be the most authentic source to guide you on your residential status.
      If the status is Indian Resident then you need to pay tax on your global income. Else, only the income accrued in India shall be taxable.
      Ideally, to maintain NRI status, your stay in India shall be less than 120 days in a Financial Year.

      Hope it helps.


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