Residential Status
  • Residential Status – Income Tax Act
  • Residential Status – FEMA

How to calculate the number of days of stay in India i.e. whether date of arrival in India and date of departure from India to foreign country shall be included or not for the purpose of Income-tax Act, 1961?

Ans. Yes, while calculating the number of days of stay in India, date of arrival and date of departure in India shall be treated as days of stay in India.

Who is treated as a Person of Indian Origin as per Income-tax Act,1961?

Ans. A person shall be deemed to be of Indian origin if he, or either of his parents or any of his grand-parents, was born in undivided India.

I am a person of Indian origin settled in abroad and engaged in the consultancy business. I stayed in India for 83 days during the F.Y. 2015-16 in respect of my consultancy business. Can I be regarded as a Non-resident in India for the F.Y.2015-16 as per Income-tax Act,1961?

Ans. As per the legislative history of Section 6, one can understand that the term ‘visit’ not only includes the period of leave or vocation but also includes the case where a person employed abroad or doing business in abroad, comes to India for a short duration in relation to his business. Accordingly in the above case, you are treated as a Non-resident in India.

How to determine residential status of a person under FEMA?

Ans. "Person resident in India" means -
(i) a person residing in India for more than one hundred and eighty-two days during the course of the preceding financial year but does not include - 

  (A) a person who has gone out of India or who stays outside India, in either case—
(a) for or on taking up employment outside India, or
(b) for carrying on outside India a business or vocation outside India, or
(c) for any other purpose, in such circumstances as would indicate his intention to stay outside India for an uncertain period;

  (B) a person who has come to or stays in India, in either case, otherwise than—
(a) for or on taking up employment in India, or
(b) for carrying on in India a business or vocation in India, or
(c) for any other purpose, in such circumstances as would indicate his intention to stay in India for an uncertain period;

(ii) any person or body corporate registered or incorporated in India,
(iii) an office, branch or agency in India owned or controlled by a person resident outside India,
(iv) an office, branch or agency outside India owned or controlled by a person resident in India;

Residential status as per FEMA under various scenarios for person leaving India on 1st June 2017:

Ans.

Sr. No.

Purpose

Residential Status – Person Resident in India /Person resident outside India

1.     

Person leaves India for taking up employment in UK for the first time

Person resident outside India since he has left India for employment.

2.     

Student leaves for California, USA, to undertake a MS course for a period of 3 years.

Person resident outside India as per the circular issued by RBI.

3.     

Person employed with an Indian company, undertakes export promotion tours to Singapore. He was in Singapore for approximately 201 days.

Person Resident in India since he is employed in India and has not gone to Singapore for taking up employment or carrying on business for an uncertain period.

4.     

Person is serving on board of a ship flying Indian National flag and has not set-up any residence, business or profession outside India.

Person Resident in India. A ship bearing the Indian National flag is a considered as the territory of that nation. He cannot be considered as person who proceeded outside India for taking up employment, setting up business or profession.

5.     

Person goes to Germany to participate and represent India. His stay was extended for 7 months.

Person Resident in India since he has gone for a fixed period.

6.     

Person has taken up American citizenship even though his wife and children are in India. He travels to India to meet his family and is in India for more than 250 days.

Person resident outside India as he has no intention to stay in India for uncertain period.

7.     

Person has gone to USA. She will return to India post maternity case of daughter.

Person Resident in India since the period of stay is definite and not uncertain.

8.     

Person is a doctor, who accompanies a patient to Australia for treating his cancer. The medical treatment continues for more than a year. 

Person Resident in India since his stay in India for employment purpose is for certain period.

9.     

Person makes a visit to India as a tourist

Person resident outside India since he is on a visit for a fixed or certain period of time.

10.  

Person comes to India for family marriage. She fell sick while she was in India and is unable to go back. Like that she stays here for more than six months.

Person resident outside India since, he has no employment and no business in India; and he has substantial employment or business abroad plus house / office etc. abroad.

11.  

Person a foreign citizen of non-Indian Origin sets up a proprietary concern in India on 1st June 2013 for carrying on business.

Person Resident in India w.e.f. 1st June 2013 as he came to India for carrying on business, irrespective of the fact that he has not at all stayed in India during the preceding FY.


Explanation:

(1)
 The residential status of a person leaving India will be determined as under:

If a person leaves India for the purpose of employment, business or for any other purpose that indicates his intention to stay outside India for an uncertain period; then he becomes a person resident outside India from the day he leaves India for such purpose.

(2)
 The residential status of a person returning to India will be determined as under:

If a person comes to India for the purpose of employment, business or for any other purpose that indicates his intention to stay in India for an uncertain period; then he becomes a person resident in India from the day he comes to India for such purpose.

 

Under the FEMA, stay for a period of 182 days is also stated. However, it shall be noted that the residential status of a person is primarily determined basis the intention of the person to stay in India. 

Who is a Person of Indian Origin?

Ans. PIO is not defined by FEMA. However, RBI in its various FEMA notifications has defined PIO.

In general, PIO means a citizen of any country (other than that of specified countries), if:

(a) he has at any time held an Indian passport or
(b) he or his parents or any of his grandparents were citizens of India by virtue of the Constitution of India or the Citizenship Act, 1955
(c) The person is a spouse of an Indian citizen or a person referred to in (a) or (b) above.

Further, each FEMA notification has specifically restricted transactions by PIO residing in specified countries. Some of such restrictions are:
(a) Restriction on Acquisition or transfer of immovable property: As per the notification pertaining to acquisition or transfer of immovable property in India Citizens of Bangladesh, Pakistan, Sri Lanka, Afghanistan, China, Nepal, Iran, Bhutan, Macau and Hong Kong are not permitted to acquire or transfer immovable property.
(b) Restriction on establishing a Branch/ Liaison/ Project office: No entity or person, being a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong and Macau shall establish in India, a branch / liaison / project office or any other place of business without the prior permission of the RBI.

Who is an Overseas Citizen of India?

Ans. The Constitution of India does not allow holding dual citizenship i.e. Indian citizenship and citizenship of a foreign country simultaneously.

A foreign national is eligible for registration of OCI
- who was eligible to become a citizen of India on 26.01.1950** or
- was a citizen of India on or at any time after 26.01.1950 or
- belonged to a territory that became part of India after 15.08.1947 and his children and grandchildren,

provided his country of citizenship allows dual citizenship in some form or other under the local laws, is eligible for registration as an OCI.

Minor children of such person are also eligible for OCI. However, if the applicant had ever been a citizen of Pakistan or Bangladesh, he will not be eligible for OCI.

**Any person who, or whose parents or grand-parents were born in India as defined in the Government of India Act, 1935 (as originally enacted), and who was ordinarily residing in any country outside India was eligible to become citizen of India on 26.01.1950. An OCI card holder is eligible to visit India without obtaining a VISA.

What is an Erstwhile Overseas Corporate Body?

Ans. OCB means a company, partnership firm, society and other corporate body owned directly or indirectly to the extent of at least sixty per cent by NRIs and includes overseas trust in which not less than sixty per cent beneficial interest is held by NRIs directly or indirectly but irrevocably.

What is the current scenario of investments routed through OCB?

Ans. OCB as a class of Investments was derecognized in 2003.
However with a view to relax FDI norms, Govt in 2015 has permitted companies ,trust,partnership firm incorporated outside India and owned and controlled by non-resident Indians to invest in India provided investment is made on  non repatriation basis. 

These entities are eligible for investments under Schedule 4 of FEMA (Transfer or issue of Security by Persons Resident Outside India) Regulations and such investment will also be deemed domestic investment at par with the investment made by residents.

Hence,a company, trust and partnership firm incorporated outside India and owned and controlled by NRIs can invest in India with the special dispensation as available to NRIs under the FDI Policy. In effect, this indirectly recognises OCB as a class of investor entity.

Owned: A company is considered as ‘Owned’ by resident Indian citizens if more than 50% of the capital in it is beneficially owned by resident Indian citizens and / or Indian companies, which are ultimately owned and controlled by resident Indian citizens.

A Limited Liability Partnership will be considered as owned by resident Indian citizens if more than 50% of the investment in such an LLP is contributed by resident Indian citizens and/or entities which are ultimately ‘owned and controlled by resident Indian citizens’ and such resident Indian citizens and entities have majority of the profit share. 

Control: Control shall include the right to appoint a majority of the directors or to control the management or policy decisions including by virtue of their shareholding or management rights or shareholders agreements or voting agreements. For the purposes of Limited Liability Partnership, ‘control’ will mean right to appoint majority of the designated partners, where such designated partners, with specific exclusion to others, have control over all the policies of the LLP. 

Is it true that NRI status is accorded to Resident students going abroad for studies?

Ans. Yes. It is true. It is observed that when students leave India for taking up a course of specified duration, such stay outside India exceeds the period officially intended. While taking up studies, or further advance courses, students may have to take up job or seek scholarship to supplement income to meet their financial requirements abroad. As students have to earn and learn, their stay for educational purposes gets prolonged than what is intended when leaving India. It is clear that on both counts viz. their stay outside India for more than 182 days in the preceding FY and their intention to stay outside India for an uncertain period when they go abroad for their studies; they can be treated as NRIs.

Can the residential status of person vary for the same FY as per FEMA and Act?

Ans. Yes. The residential status of a person for a particular FY may vary as per FEMA and Income Tax i.e. a person may be a “resident” person in India as per the Act and a person resident outside India as per FEMA and vice versa. This is due to one major distinction between Income Tax and FEMA provisions, in Income Tax the purpose of stay in India or abroad is not relevant; only the duration of stay is irrelevant.

Are the PIO card holders deemed to be OCI cardholders?

Ans. Yes. The scheme of PIO card is no more in existence. However, as per Press Note No 7/2015 of Ministry of Finance, “Person of Indian Origin” cardholders registered as such shall be deemed to be “overseas Citizen of India” cardholders.