Sunday, January 23, 2011

NRI-OCI-PIO MEANING & RESIDENTIAL STATUS UNDER FEMA 1999


on Sunday, January 23, 2011

Basic concepts
The governing law for exchange control in India is the Foreign Exchange Management Act (FEMA), 1999.

1. Who is an NRI?
Under FEMA, an NRI is a person:

  •  Who is an Indian Citizen
  • Has gone out of India or stays outside India, in either case
    1. for or on taking up employment outside India
    2. for carrying on a business or vocation outside India, or
    3. for any other purpose, in such circumstances as would indicate an intention to stay outside India for an uncertain period.

In other words, an NRI is a person who is not a person resident in India but who is a citizen of India or is a PIO.

2. Who is a PIO?

Unless otherwise specified, a PIO is a citizen of any country other than Bangladesh or Pakistan, if

  •  he at any time has held an Indian passport
  • he or either of his parents or any of his grandparents were any time citizen(s) of India by virtue of the Constitution of India or the Citizenship Act
  • the person is a spouse of an Indian citizen or a person referred to above.

In case of transactions involving immovable properties, the third condition mentioned above does not apply.

3. Who is an OCI?
An OCI is not recognized as a class of investor under FEMA or regulations made there under. Accordingly, OCIs can invest in an Indian company as PIOs if they satisfy the criteria specified for PIOs in accordance with the definition provided above.

4. Residential status
Residential status under FEMA is defined differently from that under other legislations such as the Income Tax Act, 1961

Who is a person resident in India?
For an individual to qualify as a person resident in India under FEMA, the individual must satisfy the following tests:
  • (a) Basic test of physical presence in India
    • The individual must have lived in India during the preceding financial year (April to March) for more than 182 days
  • (b) Additional tests indicating purpose
    • In addition to the basic test, the individual must be living in India for either of the following purposes:
      • For or on taking up employment in India
      • For carrying on a business or a vocation in India
      •  For any other purpose.

In such circumstances as would indicate his intention to stay in India for an uncertain period.

In other words, to be treated as a person resident in India under FEMA, a person has not only to satisfy the
condition of the period of stay (being more than 182 days during the preceding financial year) but has to also comply with the condition of the purpose/intention of stay.

Who is an NR in India?

A person is an NR in India under FEMA, if he/she is not a resident as stated above.

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