NRI SERVICES

Basic principles for NRIs taxation in India

1. Meaning of Non-resident

The residential status of a person in India depends on his period of stay in India. The period of stay is counted in number of days for each financial year beginning from 1st April to 31st March (known as previous year under the Income-tax Act, 1961). It is pertinent to note that the day of departure from India and the day of arrival in India shall also be considered as a day of stay in India.

NON-RESIDENT

If an individual who satisfies understated both the conditions of section 6 of the Income-tax Act, 1961 (the “Act”) then he shall be considered as a Non-Resident as per the Act.

Condition	Status
1. He is not in India for 182 days or more during the relevant previous year.	If yes, then he is a non-resident. (subject to condition “2”)
2. He is not in India for 60 days or more during the previous year and he is not in India for 365 days or more during the 4 years prior to the previous year.	If yes, then he is a non-resident. (subject to the exceptions mentioned below)

Exceptions:

• If an individual being a citizen of India or a person of Indian origin comes on visit to India during the year or
• If an individual being a citizen of India leaves India during the year as a member of the crew of an Indian ship for the purpose of employment or
• If an individual being a citizen of India leaves India during the year for employment outside India.

In other words, the above categorized individuals are non-resident if they satisfy condition “1” alone.

RESIDENT

In a case where any one of the above two conditions are not satisfied, the person shall be treated as a Resident in India. Resident is further classified into two categories:

1. RESIDENT BUT NOT ORDINARILY RESIDENT (RNOR)
2. RESIDENT AND ORDINARILY RESIDENT (ROR)

RESIDENT BUT NOT ORDINARILY RESIDENT (RNOR)

An individual who has returned to India for good is covered under the provisions of section 6(6) of the Act. He is given a special status of RESIDENT BUT NOT ORDINARILY RESIDENT (RNOR) if he satisfies one of the following conditions:

Condition	Status
1. He is not a resident, as per the above provisions, for at least 9 out of 10 previous years prior to the previous year under consideration.	If yes, he is RNOR
2. His stay in India during the 7 previous year prior to the previous year under consideration should not be 730 days or more	If yes, he is RNOR

If an Individual doesn’t satisfies both the above conditions, the he will be considered as RESIDENT BUT NOT ORDINARILY RESIDENT (RNOR)

Note: Generally, a person who is returning to India after 9 years of stay outside India (and who was non-resident for each of the 9 years under the Act), shall remain RNOR for the period of two years.

Permanent Account Number (PAN) is a UNIQUE 10-digits alpha numeric number allotted by the Income Tax Department. It is issued in the form of a laminated card. It is PERMANENT, and the number will not change with change of address of the PAN holder or change of Income Tax Officer. The Income Tax Department issues PAN in partnership with UTI Technology Services Ltd and National Securities Depository Ltd. It is a simple process of filling up a form, attaching required photographs and necessary documents in order to obtain a PAN number. One needs to submit the requisite application in Form No 49A or Form No. 49AA (depending on citizenship). Every person assessable to tax or satisfying certain criteria is required to obtain PAN. Further, PAN is mandatory for transacting in financial markets in India.

A. Statutory Requirement

Under the Income-tax Act, 1961, the following persons resident or non-resident have statutory obligation for acquiring and quoting PAN:

• If ones total income during any financial year exceeds the basic exemption limit under Income-tax Act,1961 or the total sales or gross receipt of business/Profession are likely to exceeded Rs. 5 lakhs in any previous year.
• Other prescribed persons under the Income-tax Act, 1961.

B. General Requirement

It is necessary to quote PAN or provide the copy of PAN card for entering into following transactions.

• For filing the Returns of Income, challans for payment of Income Tax.
• Opening of an account with a Bank, Demat Account for shares.
• For investing in shares and securities i.e. Initial Public Offers, Portfolio Investment Schemes and Portfolio Management Schemes, Mutual Funds.
• Sale or purchase of immovable property valued at Rs. 10 lakhs or more,
• Sale or purchase of motor vehicle
• Where non-resident has any income on which tax has been deducted, PAN is to be given to the person deducting tax.
• Other transactions