Taxation Of Non Resident Indian

General Information


Under the Income Tax act, every person who is an assessee and whose total income exceeds the maximum exemption limit, shall be chargeable to the income tax at the rate or rates prescribed in the finance act. Such income tax shall be paid on the total income of the previous year in the relevant assessment year. But the total income of an individual is determined on the basis of his residential status in India.

Resident and Non Residents

The income tax to be paid by an individual is determined by his residential status. An individual can be termed as a 'resident' if he stays for the prescribed period during a fiscal year i.e. 1st April to 31st March either for

 182 days or more

 60 days or more (182 days or more for NRIs) and has been in India in aggregate for 365 days or more in the previous four years

 However, the criteria of 60 days are extended to the first criteria of 182 days for any one of the following instances:

 1. If you reside abroad for the purpose of employment.

 2. If you reside abroad as the member of the crew of an Indian ship.

 3. If you are an Indian citizen or a person of Indian origin who comes to India on a visit.

Any person who does not satisfy these norms is termed as a 'non-resident'. A resident individual is considered to be 'ordinarily resident' in any fiscal year if he has been resident in India for nine out of the previous ten years and, in addition, has been in India for a total of 730 days or more in the previous seven years. Residents who do not satisfy these conditions are called individuals 'not ordinarily resident'.



In recent times the Government of India has opened the Indian market and economy to attract more foreign capital and technical know-how. The foreign investors may be Indian Nationals who resided outside India and other foreign investors including corporations. A person who resides outside India is technically known as 'non-resident'. The residential status of an individual does not depend upon the nationality or domicile of that person but it depends upon his stay in India during the previous year.



In case of an assessee, other than an individual, the residence depends upon the place from which its affairs are controlled and managed. If the control and management of the affairs of a foreign company is, during the previous year, located wholly in India, it shall be treated as resident in India. Where part of the control and management of the affairs of a foreign company is situated outside India, it shall be treated as a non resident company.



Status Indian Income Foreign Income

Resident and ordinarily resident Taxable Taxable

Resident but not ordinarily resident Taxable Not taxable

Non Resident Taxable Not taxable




So far as the business income is concerned, the source country gets the right only if there is a 'permanent establishment' or a 'fixed place of business' there. Taxation of business income is on net income from business at the rate prescribed in the Finance acts.



Income derived by rendering of professional services or other activities of independent character are taxable in the country of residence except when the person deriving income from such services has a fixed base in the other country from where such services are performed. Such income is also taxable in the source country if his stay exceeds 183 days in that financial year.



Income from dependent personal services i.e. from employment is taxed in the country of residence unless the employment is exercised in the other state. Even if the employment is exercised in any other state, the remuneration will be taxed in the country of residence if

 the recipient is present in the source state for a period not exceeding 183 days;

 the remuneration is paid by a person who is not a resident of that state;

 and the remuneration is not borne by a permanent establishment or a fixed base.