When does resident status change to NRI
Resident status is the legal classification of an individual under the Indian Tax System. It is used to determine the tax liability of the individual and is determined by the number of days of stay in India. An individual is classified as a Resident if he has stayed in India for more than 182 days during the current financial year or 365 days during the preceding 4 years, including the current year.
Resident status also determines the scope of taxation for an individual in India.
Residents are subject to tax on their worldwide income in India while Non-Residents are only taxed on their income earned in India. In addition, Residents are eligible for various deductions and exemptions that are not available to non-residents.
Resident status can change to Non-Resident Indian (NRI) if the individual has stayed outside India for more than 182 days during the current financial year or 365 days during the preceding 4 years, including the current year.
In such cases, the individual will be considered a NRI and will be subject to different tax rules and regulations.
In case of resident individuals who have dual citizenship, they will be treated as residents in India and will be subject to tax on their worldwide income. However, if the other country of residence has a Double Taxation Avoidance Agreement (DTAA) with India, then the individual can claim benefits under the DTAA.
In addition, resident individuals who have shifted their place of residence out of India due to employment, business or any other purpose can also change their status to NRI. In such cases, they will be subject to different tax rules and regulations.
When does NRI Status change after returning to India?
NRI (Non-Resident Indian) status changes after an individual returns to India, depending on the length of time spent outside of the country. If a person stays abroad for more than 182 days in a financial year, then he/she is considered a non-resident Indian and the status changes from resident to non-resident.
However, if the person stays abroad for more than 60 days but less than 182 days, then he/she would be classified as a person of Indian origin (PIO).
A PIO is someone who has stayed abroad for less than 182 days but has strong connections with India such as being born in India or having held an Indian passport at any point of time.
For taxation purposes, it is important to understand whether one is a Resident or Non-Resident Indian (NRI).
As per the Income Tax Act, 1961, an Indian citizen is considered a Resident Indian if he/she is in India for more than 182 days during a financial year or 365 days in the preceding four years and has stayed in India for at least 60 days in that year.
In case of a Resident Indian, all income earned in India or abroad is taxable in India.
However, for NRIs, the income earned outside India is not taxable in India. The taxability of the income earned in India by an NRI depends upon the nature of the income.
For example, income from salaries, house property and capital gains are taxable in India while income from business or profession is not taxable in India.
Therefore, it is important to keep track of the number of days spent in India and abroad while travelling in order to determine whether one is a Resident or Non-Resident Indian. This will help in determining the taxability of the income earned in India or abroad.