My son went to UK in the first week of October for higher studies and will not return to India till October next year. What will be his resident status and when should he declare his NRI status to the bank? Which other financial institutions need to be informed about his NRI status?
—Name withheld on request
Under the Income Tax Act, residential status is determined on the basis of physical presence of a person in India. If the person fulfills any of the basic conditions mentioned below, the person will qualify as a ‘resident’; would otherwise qualify as ‘Non-resident’.
Basic Conditions: (a) has a physical presence in India of 182 days or more during the relevant financial year; or (b) has a physical presence in India of 60 days or more during the relevant financial year and 365 days or more in the preceding four financial years. (c) an individual, being a citizen of India, the total income, other than income from foreign sources, exceeds 15 lakh during the relevant financial year, if he is not liable to tax in any other country.
Your son, who is physically present in India for 182 days or more during the financial year 2022-23 up to 30 September 2022, will qualify as a ‘resident’ of India for the financial year 2022-23. In addition, once he returns to India in October 2023 and considers that he has not traveled outside India, he will be allowed to travel for 60 days or more during the financial year 2023-24 and 365 days or more in the preceding four financial years. Will be physically present in India for longer than that. In such a case, he will also qualify as a ‘resident’ of India for FY24.
The rules for determining residential status under the Exchange Control Act are different from those under the Income Tax Act.
Under the Exchange Control Act, when a person leaves India for employment, business or any other purpose indicating his intention to remain outside India for an indefinite period, he may be deemed to be a “person resident outside India”. Is.
Since your son is not leaving India for any reason, the residential status under the Exchange Control Act will not change and will continue to be a “person resident in India”. In such cases, there is no need to change the status in bank accounts, mutual funds, demat, etc.
Sonu Iyer is EY India’s Tax Partner and People Advisory Services Leader.
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