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How does one become a non-resident under Income Tax and FEMA?

Author: Balwant Jain/Wednesday, April 10, 2019/Categories: Exclusive

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How does one become a non-resident under Income Tax and FEMA?

Though the word “non resident” is used interchangeably but the tax laws and Foreign Exchange laws have different connotation of it as the purpose of both the laws is different. 

Non resident under tax laws

Physical presence is only considered under the tax laws and your residential status can normally be determined after end of the financial year based on your aggregate stay in India. So you would be a resident of India for the financial year 2018-2019 if either you were present in India for 182 days or more during April 1, 2018 to 31st March 2019 or you were in India for 60 days or more during the previous year ended March 31, 2018 and were also present  in India for 365 days or more during the four years April 1, 2014 to March 31, 2018.  There is relaxation in respect of the second condition of stay requirement which will be enhanced to 182 days instead of 60 days for Indian citizen who leaves India during the previous year either as crew member of an Indian Ship or for taking up an employment outside or an Indian Citizen or a person of Indian origin who comes to India for a visit. So in case you do not satisfy any of these two basic conditions, you would straightway become a non resident.  

There is one more category of “Ordinary but not ordinary resident” (ONOR) under the tax laws. Once you satisfy any of the above two basic conditions, you would still qualify as a ONOR if you were a non resident for nine years out of 10 years period ended on March 31, 2018 or were not in India for more than 729 days during seven years ending on March 31, 2018.

Implications of becoming a non resident

For a resident, global income becomes taxable in India even if such foreign income might have been taxed in other country, subject to availability of tax credit for taxes paid on such income and double tax avoidance agreement benefits. In contrast for a non-resident, only the income which is first time received in India or accrues from assets held in India or for services rendered in India become taxable here. So your salary will become taxable in India if it is directly credited in India while you are working abroad even if you are a non resident.  Moreover, there are certain tax benefits which are not available to non resident.

Non resident under FEMA

Unlike under the tax law where stay in India is considered, the foreign exchange regulations go by intention of an individual in addition to stay in India. Under FEMA a person becomes a non resident as soon as he leaves India to take up an employment outside India or to start a business or profession outside India or leave the country with an intention to stay outside for an indefinite period.

However if you leave India for medical treatment or on a business trip or on holidays or even for study, you would not become a non resident under FEMA.  

Likewise, one would become a resident under FEMA if he came to India for taking up an employment or for carrying on any business or profession or spend retirement years.

Unlike tax laws where residential status is determined at the end of the year based on the physical stay, the status under FEMA changes instantly when a person either leaves the country or comes to India.

The residential status under FEMA is important to determine as to what type of investments you can make in India or how you can remit money outside India. However, the residential status under FEMA and tax law has nothing to do with your citizenship.

The author is tax and investment expert and can be reached on


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