Many Indians prefer to leave the country for better jobs and educational possibilities. While some Indians opt to reside in a foreign nation for specific years, others move for good. If an Indian spends most of a financial year outside India, they are an NRI. Even NRIs are considered Indian citizens and are subject to different laws and rules than permanent residents of India.
Full Form of NRI
Non-Resident Indians is the full form of NRI that includes Indian individuals who do not live in any Indian state consistently. An individual would obtain an NRI title in India if they spent over 183 days in a foreign nation during the previous financial year. An NRI lives outside India for most of the fiscal year, irrespective of their citizenship.
How to Gain NRI Status?
The region determines the length of stay of the naval officers or merchants who spend time on international seas. NRIs are those who have stayed for over 183 days in international waters. However, if they spent most of their time in Indian territorial seas, they are deemed as citizens of India.
Section 6 of the 1961 Income Tax Act assesses whether an individual is an NRI. A person whose principal home is outside India can be regarded as a citizen of India if they meet any of the following conditions:
- If they spent 182 days or above in India in the prior year, and 120 days if the taxable income exceeds Rs.15 lakhs.
- If they spent at least 60 days in India in the past year and at least 182 days in the four years before the last year.
- If a person earns a total revenue of more than Rs. 15 lakhs, they do not require to pay tax in any country.
Advantages of Being an NRI
People with NRI status enjoy various advantages and perks in India. Some of them are:
- NRIs are generally citizens of developed countries or First World Nations. It is safe to believe that such nations have a higher standard of living.
- The Indian government has secured seats for NRI members in every key political organization.
- NRIs are not required to pay income tax to the government except when the money is earned in India.
- NRIs have priority enrollment at Indian educational institutes.
- They have the right to vote in all local and national elections.
Disadvantages of Being an NRI
Even though there are many perks to an NRI, there are a few drawbacks. Some of them include the following:
- Even though NRIs don’t pay taxes to the government of India, they must pay the tax of the nation in which they reside. In most first-world countries, income taxes are substantially higher compared to India.
- NRIs are not eligible for any of the benefits provided by the Indian government to ordinary residents of India.
- NRIs are not granted citizenship in their home country, and most nations have a complex and time-consuming process for giving citizenship status to a foreign person.
- NRIs need not pay taxes for their regular income. However, they still have to pay for the income earned in India.
Categories of NRIs
There are various categories of NRIs, ranging from students to fully functioning adults. Here are the categories in which they are distinguished:
- Representatives from the national and state governments and public sector workers who live abroad.
- Indian citizens who serve in organizations such as the IMF (International Monetary Fund), the World Bank, and the UNO (United Nations Organization).
- NRIs who are studying, working, conducting business, or taking a holiday abroad.
Impact of Indian Tax Laws on NRIs
As a native, your worldwide income is taxed, including money earned both within and outside India. However, as an NRI, only the income earned or retained in India is taxable, which includes dividends by Indian corporations. As an NRI, you may be taxed on income such as profits from asset transfers, revenue generated from work done in India, rent collected on Indian properties, interest payments on bank accounts, and profits on fixed deposits.
Indian Student NRIs
Indian students studying at foreign universities spend the majority of their time abroad. As a result, they are NRIs. Although their presence abroad is typically limited in duration and depends on a study visa, their resident status in India varies. The students are still Indian nationals, but they now have the classification of NRIs and must follow the country’s norms and regulations.
For NRIs, not living permanently in India has both benefits and downsides which we understood from the above-stated article on the Full Form of NRI. While they have more prospects and a higher standard of living in the wealthier countries (first-world nations), they do not enjoy citizenship rights there. An NRI might take a long time to get citizenship in their home country. Moreover, NRIs gain from reservation privileges and are free of taxation, yet they face the drawbacks of holding a Non-Resident External account.