What Is NRI? A Complete Guide for Non-Resident Indians

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Key Takeaways

• Full form of NRI is Non-Resident Indian, referring to Indian citizens living abroad for work, business, or other purposes.
• NRI is defined differently by Income Tax Act of India and FEMA.
• There are several tax benefits for NRIs under compliance rules.
• NRIs can opt for different types of accounts such as NRE, NRO, and FCNR to manage income earned in and outside India.

Whether you’re planning to move overseas, managing finances can be a challenge. It’s important to know how India classifies and treats NRIs. This will help you manage your earnings in India and abroad. In this guide, we’ll explain what NRI is according to banking and financial regulations, and how this status affects your accounts, investments, and taxation.

What is an NRI (Non-Resident Indian)?

The meaning of NRI refers to an Indian citizen living abroad for work, business, education, or other reasons. Taxation on their income depends on its source, and banks offer tailored products based on their financial profile.

Who is considered an NRI?

Determining who is NRI requires understanding the definitions under both the Income Tax Act and FEMA. The Income Tax Act defines NRI based on the individual’s duration of stay in India for taxation purposes, whereas FEMA considers residency status and intent to reside abroad. The following sections explain both criteria in detail.

NRI Definition as per the Income Tax Act of India

Under the Income Tax Act of India, a person is a Non-Resident Indian (NRI) for an income year if:

• They have not been in India for 182 days or more during that year, or
• They have not been in India for 60 days or more during that year and at least 365 days within the last 4 years.

There are exceptions, though. For example, Indian citizens who travel from India to work overseas or as crew on Indian vessels have to spend less than 182 days in India in the same financial year to qualify as NRIs.

Example:
If you are an Indian citizen and leave India for employment abroad, for example, if you take up a job in Dubai and fly out on 15 July 2024, you will have stayed in India for only 106 days between 1st April and 14th July 2024. Since your stay is less than 182 days and you have left the country for a job, you would qualify as an NRI for the financial year 2024 to 2025 under the Income Tax Act.

How is NRI status defined under FEMA regulations?

As per the Foreign Exchange Management Act (FEMA), meaning of NRI applies to a person residing abroad who meets either of these conditions:

• They are a citizen of India residing outside India (except Nepal or Bhutan) for more than 182 days in one Financial Year (April-March).
• They leave India with the intention to stay abroad for an uncertain period for purposes such as employment, business, or education - in which case they become an NRI from the day they depart India.

How Are NRIs Different from OCIs and PIOs?

While the meaning of NRI, OCI, and PIO statuses all relate to India, they differ in citizenship, residency, and rights. Knowing these distinctions is important for banking, taxation, and investment eligibility. Here's a quick comparison:

Benefits for NRIs

Below are some of the key NRI account benefits and other financial advantages available to you in India.

1. Tax Advantages - NRIs benefit from favourable NRI taxation rules, including tax-free interest on NRE and FCNR accounts, deductions under sections like 80C and 80D, lower tax on NRI on certain long-term capital gains, and relief from double taxation through DTAA agreements.
2. Repatriation Options - Funds in NRE and FCNR accounts can be transferred abroad without restrictions. When managing an NRI account, note that NRO balances can be remitted overseas up to USD 1 million per financial year after fulfilling tax obligations.
3. Variety of Account Options - Select from NRE, NRO, and FCNR accounts according to your source of income and currency preference.
4. Investment Access - NRIs are allowed to invest in Indian mutual funds, shares, property, and deposits through approved RBI channels.
5. Currency Management - FCNR accounts allow you to maintain balances in foreign currencies, avoiding currency conversion losses.
6. Convenient Banking Access - Online and mobile banking, international debit cards, and easy account opening from overseas make banking convenient.
7. Loan and Credit Support - Access home, personal, and auto loans in India. Overdraft facilities and insurance are also provided.
8. Ease of Operations - Facilities such as joint accounts, nominee facilities, and power of attorney ensure convenient account operations.
9. Remittance Services - Quick and economical transfer to India with best exchange rates and multiple digital channels. DBS Treasures offers same-day remittances to ensure your money is available quickly with competitive exchange rates.
10. Security Banking - Funds are safe under RBI guidelines and deposit insurance with superior online security measures.

Manage your wealth effortlessly while enjoying premium benefits through the DBS Treasures NRI savings account.

Where NRIs Can & Cannot Invest

NRIs enjoy a wide range of investment opportunities in India, but certain restrictions still apply under RBI and FEMA rules. Knowing the difference helps you stay compliant and avoid costly mistakes.

• Allowed: NRIs can invest in mutual funds, Indian company shares through the Portfolio Investment Scheme (PIS), real estate (except agricultural land), fixed deposits with banks/NBFCs, and government bonds.
• Restricted: NRIs are prohibited from purchasing agricultural land, plantation property, or farmhouses. They are also barred from investing in certain small-savings schemes such as the Public Provident Fund (PPF) after changing their residency status.

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Different Types of Bank Accounts Applicable to NRIs

NRIs have the option to open three main categories of bank accounts in India. These accounts help manage earnings from India as well as funds transferred from abroad, with specific rules for repatriation and taxation. Before choosing one, it’s important to understand what NRI account is and how each type (NRE, NRO, and FCNR) serves different purposes.

• Non-Resident External (NRE) Account: This account is used to transfer foreign income to India and maintain the balance in Indian Rupees. Interest from this account is completely free from income tax in India.
• Non-Resident Ordinary (NRO) Account: Designed for managing income originating in India, such as rent, dividends, pensions, and interest. The interest earned is subject to taxation in India with TDS applied. Repatriation of funds is permitted up to USD 1 million annually, provided all required tax procedures are fulfilled.
• Foreign Currency Non-Resident (FCNR) Account: A term deposit account enabling NRIs to maintain savings in foreign currencies like USD, GBP, JPY, EUR, CAD, and AUD.

Common Mistakes NRIs Should Avoid

Even financially savvy NRIs can make errors that lead to tax issues, compliance problems, or missed benefits. Here are some to watch out for:

• Keeping resident savings accounts instead of converting to NRO/NRE.
• Missing DTAA benefits and overpaying taxes.
• Forgetting to file ITR for income earned in India.
• Not updating KYC details in bank and investment accounts after changing residency status.
• Investing in schemes or products that are restricted for NRIs, such as agricultural land or certain small-savings plans.

Reasons why people become NRIs

The NRI meaning goes beyond simply living outside India. It reflects a change in residence driven by personal or professional circumstances. People may become NRIs for reasons such as:

• Employment opportunities abroad: Relocating for a new job, higher salary or career advancement.
• Higher education: Studying at universities or pursuing specialised courses overseas.
• Business or investments: Establishing or expanding ventures in foreign markets.
• Family relocation: Moving to join a spouse, children or relatives settled abroad.
• Lifestyle or retirement: Choosing a different living environment or long-term residence outside India.

Financial & Tax implications for NRIs

NRI taxation in India depends on your residential status, source of income, and the applicable income tax slabs. It is important to determine whether your income is taxable in India or exempt, as rules vary for earnings from within India and abroad. Proper tax planning can help NRIs reduce liabilities, claim deductions, and ensure compliance with Indian regulations.

What Income Sources Are Taxable for NRIs in India?

As an NRI you will be required to pay income tax if you’re earning from the following sources in India:

• Salary earned in India or for work carried out within India.
• Rental earnings from property located in India, whether the property is occupied or vacant.
• Profits from selling Indian assets such as real estate, mutual funds, or company shares.
• Interest income from NRO accounts, fixed deposits, and savings accounts.
• Business income generated in India.
• Dividend income from Indian companies.

Foreign Income earned outside India or interest earned on NRE and FCNR accounts remain tax-free in India.

NRI Tax Slabs 2025

The following table outlines the applicable income tax rates for NRIs for the financial year 2025. These slabs are a key part of NRI taxation, helping individuals plan income, investments, and tax liabilities effectively.

What is DTAA?

The Double Taxation Avoidance Agreement (DTAA) is a treaty between India and over 90 countries to ensure NRIs don’t pay tax twice on the same income. It allows you to claim tax relief in one country if you’ve already paid in the other, usually by providing a valid Tax Residency Certificate (TRC).

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Conclusion

Understanding what NRI is for effective financial management, tax compliance, and smart investment planning is. From selecting the right NRI account to knowing applicable taxation rules, NRIs can better protect earnings and optimise returns.

Whether relocating temporarily or permanently, a clear understanding of these aspects ensures secure, compliant, and efficient financial planning in India and abroad. Consider exploring options like the DBS Treasures Premium Savings Account to enhance your NRI banking experience with tailored benefits.