• By ADMIN
• Posted 05 Aug, 2020
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Individual Residential Status - FEMA

Inadvertently the Residential Status under Income-tax law had been used to change the status of bank account to treat the same as NRO or NRE accounts which are regulated by Reserve Bank of India (RBI). RBI has been entrused and empowered by Foreign Exchange Management Act, 2000 (FEMA) in this regard. The purpose and manner of arriving / computing Residential status under Income-tax law and FEMA are totally different.

For example, Income-tax law considers current year's stay and in certain cases preceeding year's aggregate stay to identify residential status of current year. But, under FEMA, to identify the residential staus for current year, one has to count the number of days stayed in India in previous year. i.e if you want to check the residental status for 2019-20, you have check the no.of days stayed in 2018-19.

One must understand the difference between "Reside" and "Stay" as the former mean to permanancy and the later means to physical presence.

Residential Status under FEMA/RBI

Under FEMA, if an Individual resdies in India in the financial year 2018-19 for more than 182 days, then he becomes "Person Resident in India" in the year 2019-20. But when such individual falls in to the following categories becomes "Person Resident Outside India".

If such Individual gone out of India or stays outside India:-

   a. for employment outside India, or 

   b. for carrying on 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.

In addition to the above, if such Individual falls in the following categories becomes "Person Resident in India"

If such Individual came to India or stays India India:-

   a. for employment in India, or 

   b. for carrying on 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.

Example-1

If an Individual stays in India for < / = 182 days in the financial year 2018-19 becomes "Person Resident Outside India" for 2019-20. 

Example-2

If an Individual stays in India for > 182 days in the financial year 2018-19 becomes "Person Resident in India" in 2019-20. But if he gone out of India in 2019-20 for the reasons of taking up an employment outside India, or for carrying on business or vocation outside India or for any other purpose as would indicate his intention to stay outside India for an uncertain period, becomes "Person Resident Outside India" for the year 2019-20.

Example-3

If a Foreign National visits India in 2018-19 and stays in India for > 182 days in the financial year  2018-19 becomes "Person Resident in India" in 2019-20 only if he came to India for employment in India or for carrying on business or vocation in India or for intention to stay in India for uncertain period, otherwise he becomes "Person Resident Outside India" for 2019-20.