NRI/PIO

What is NRI

The term non-resident refers only to the tax status of a person who, as per section 6 of the Income-tax Act of 1961, has not resided in India for a specified period for the purposes of the Income Tax Act.

The rates of income tax are different for persons who are "resident in India" and for NRIs. For the purposes of the Income Tax Act, "residence in India" requires stay in India of at least 182 days in a calendar year or 365 days spread out over four consecutive years.

According to the act, any Indian citizen who does not meet the criteria as a "resident of India" is a non-resident of India and is treated as NRI for paying income tax.

 

What is PIO

Government of India considers anyone of Indian origin up to four generations removed to be a PIO, with the exception of those who were ever nationals of Afghanistan, Bangladesh, Bhutan, Nepal, Pakistan, or Sri Lanka

The prohibited list periodically includes Iran as well.[15] The government issues a PIO Card to a PIO after verification of his or her origin or ancestry and this card entitles a PIO to enter India without a visa

The spouse of a PIO can also be issued a PIO card though the spouse might not be a PIO. This latter category includes foreign spouses of Indian nationals, regardless of ethnic origin, so long as they were not born in, or ever nationals of, the aforementioned prohibited countriesPIO Cards exempt holders from many restrictions that apply to foreign nationals, such as visa and work permit requirements, along with certain other economic limitations.

 

WHO IS AN NRI/ PIO ?

An Indian abroad is popularly known as Non-Resident Indian (NRI).

The NRI status is legally defined under the Foreign Exchange Management Act, 1999 and the Income Tax Act, 1961 for applicability of respective laws.

The Term NRI, Generally, means a non-resident who is either an Indian Citizen residing outside India and includes Foreign Citizen of Indian origin residing outside India

 FEMA defines a person of Indian Origin (PIO) as a person, being a citizen of any country (a) who at any time held an Indian Passport or (b) a person who himself or either of his parents or any of his grandparents were citizens of India by virtue of the Constitution of India or the Citizenship Act, 1955, or (c) spouse of an Indian citizen or (d) spouse of a person covered under (a) or (b) above. However, the citizens of Bangladesh, Pakistan, Sri Lanka, Afghanistan, China,

Iran, Nepal and Bhutan are not considered as PIO even if they satisfy the above conditions under FEMA for different purposes under different regulations.

 

NON - RESIDENT STATUS UNDER THE INCOME TAX / WEALTH TAX ACT

 

The term non-resident is negatively defined under section 6 of the Income-tax Act. An individual who is not a resident under the Income-tax Act is a non-resident (generally, termed NRI). Thus, one should know the definition of a resident and if he is not a resident then he is a non-resident.

 The status of a person as a resident or non-resident 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). The definition is explained in simple terms as under.

 If an individual who satisfies understated both the conditions of section 6 of the Income-tax Act, then he becomes a Non-Resident.

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.                          (so check the next condition)
2.	He is not in India for 60 days or more during the previous year and he is not in India for 365 days and more during the 4 years prior to previous year.	>>	If Yes, then he is non-resident.

 

If you are not satisfying any of the above conditions to become non-resident, check whether following assists you to become a non-resident.

 In the case of an individual on visit to India or a member of the crew of an Indian ship or a person leaving India for employment outside India, the requirement of stay in India of 60 days in condition 2 above is extended to 182 days.

 

RESIDENT BUT NOT ORDINARILY RESIDENT (RNOR)

A NRI who has returned to India for good is covered under the provisions of section 6(6) of the Income-tax 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 year 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

Note

An individual, who is non-resident for 9 consecutive years, shall remain RNOR for 2 subsequent years and as such his foreign income is not taxable in India while his status is that of RNOR. The status of RNOR renders certain income of such individual non-taxable as explained in Tax liability of NRIs.

 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 Income Tax Act, 1961), shall remain RNOR for a period of two years only.

 

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 Capital Gains

The profit on sale of Capital asset is treated as Capital Gains. The Capital Assets (which are not held as stock - in - trade) are Shares, Debentures, Government securities ,Bonds Units of UTI and Mutual Funds ,Immovable property, jewellery, archeological collections, drawings, paintings, sculptures, any work of art etc.

The Capital gains are segregated into long term capital gains and short term capital gains in the following manner :-

 

Capital Asset	Short-term	Long-term
Shares held in company, listed securities, Units of UTI or mutual fund or zero coupon bonds	If held for a period not exceeding 12 months from the date of acquisition	Capital Asset which is not a short term capital asset is long term capital asset.
All other capital assets like, immovabale property, jewellary etc	If held for period not exceeding 36 months from the date of acquisition	Capital Asset which is not a short term capital asset is long term capital asset.

 

 

CAPITAL GAINS TAX EXEMPTIONS ON REINVESTMENT

NRIs are entitled to claim exemption from the tax if they reinvest long term capital gains /net sale consideration into following assets.

LONG TERM ASSET SOLD	REINVESTMENT IN	CONDITIONS	AMOUNT TO BE INVESTED	CURRENT RATE OF RETURN
All Long term capital assets	Tax Saving Bonds by a. National Highways Authority of India b. Rural Electrification Corporation Ltd. (REC)	1) Investment is to be made within 6 months from the date of transfer of asset. 2) New Asset is to be held for a period of 3 years 3) You cannot borrow against security of this bonds.	Amount equivalent to Capital Gains or Rs. 50 Lakhs whichever is less	NHAI - 5.75% payable annually
Any Long Term Capital Asset Other Than Residential House	Residential House	There are many conditions, which shall be provided at request	Amount equivalent to Net Sales consideration
Residential House	Residential House	There are many conditions, which shall be provided at request	Amount equivalent to Capital Gains

 

SET-OFF OF GAINS AGAINST LOSSES:

 The provisions of the Income Tax Act 1961 to offset the Losses against the Gains in the following situation:-

Set off of gains against loss in case of sale on different dates in the same Financial Year.

The Gains earned on transfer of capital assets should be set off against Losses incurred during the same financial year (i.e. during April – March) subject to the provisions of Income Tax Act.

Carry Forward of Unabsorbed Capital Loss in subsequent year.

 If the loss cannot be set off or entirely be set off in the same year, it is allowed to be carried forward to subsequent year provided return of income is filled within the prescribed time limit.

 

Obtaining Tax Exemption Certificate:

When NRI has incurred loss on sale of shares and later when he sells other shares where he has capital gains, in such a case the NRI is eligible to claim set off provided both the transactions are in the same year i.e. during April- March financial year. In this case, NRI can apply for Tax Exemption Certificate prior to the sale of shares of second lot where he has capital gains to ensure set –off and Nil or lower deduction of tax.

 

Long Term Capital Gains
Capital Assets	Equity Shares			Others Assets	Units of Mutual Fund
	Listed		Unlisted	Immovable Property jewellery etc.	Equity Oriented		Debt Oriented
	Securities  Transaction Tax is paid	Others			Securities  Transaction Tax is paid	Others
Rate Of TDS	NIL	11.33%	22.66%	22.66%	NIL	11.33%
Rate Of Tax	NIL	11.33%(Without Indexion) 22.66% (With Indaxation)	22.66%	22.66%	NIL	11.33% (Without Indaxation) 22.66% (With Indaxation)	11.33% (Without indexation)  22.66% ( With Indaxation)

 

 

Short Term Capital Gains
Capital Assets	Equity Shares			Others Assets	Units of Mutual Fund
	Listed		Unlisted	Immovable Property jewellery etc.	Equity Oriented		Debt Oriented
	Securities  Transaction Tax is paid	Others			Securities  Transaction Tax is paid	Others
Rate Of TDS	16.995%	33.99%	33.99%	33.99%	16.995%	33.99%	33.99%
Rate Of Tax	16.995%	slab rates	slab rates	slab rates	16.995%	slab rates	slab rates

 

Income (In Rs.)	Tax Liability (In Rs.)	Surcharge	Education Cess
upto 1,50,000/-	NIL	NIL	NIL
Between 1,50,000/- to 3,00,000/-	10% of Income in excess of Rs. 1,50,000/-	NIL	3% of Income Tax
Between 3,00,000/- to 5,00,000/-	15,000 /- + 20% of Income in excess of Rs. 3,00,000/-	NIL	3% of Income Tax
Between 5,00,000/- to 10,00,000/-	55,000/- + 30% of Income in excess of Rs. 5,00,000/-	NIL	3% of Income Tax
Above 10,00,000/-	2,05,000/- + 30% of ( Total Income minus 5,00,000 )	10% of Income Tax	3% of Income Tax & Surcharge

 

 

Capital Gain Taxation
	Individual/HUF	Domestic Company	NRI
Other Than Equity Oriented Schemes Long Term Capital Gains (Units held for more than 12 month) Short Term Capital Gains (units held for 12 months or less)
Long Term Capital Gains	NIL	NIL	NIL
Short Term Capital Gains	15%	15%	15%
Other Than Equity Oriented Schemes Long Term Capital Gains (Units held for more than 36 month) Short Term Capital Gains (units held for 36 months or less)
Long Term Capital Gains	20%	20%	Listed - 20% Unlisted - 10%
Short Term Capital Gains	30%	30%	30%