Who Is an NRI PIO OCB ? Know the rules

If you see Gujrat’s phenomenal success and want to learn the first lesson from it- It would be involving NRIs or Non-Resident Investors in the growth. Now many states like Rajasthan, MP, Telengana, AP are following this model. NRI PIO OCB – all want to invest in India whether it is their personal investments or in form of capital to promote business. The one thing that comes to their mind is – Taxation.

Here is a series for NRIs to get themselves equipped with Indian Laws and benefits. And to start with let’s learn when a person is NRI and when not? Also, we will get to know Person of Indian Origin & Overseas Corporate Bodies. Also, do not miss the entertaining video on NRI PIO OCB at the end of this page.

NRI is a person residing outside India who is a citizen of India or Person of Indian Origin (PIO).

Section 2 (30) of the income-tax Act, 1961, defines “Non-Resident” as a person who is not a resident and includes a person who is not ordinarily resident. Now you may wonder what does the term ‘not ordinarily resident’ mean?

To figure this out, first, find out the meaning of “Resident” & “Not Ordinary Resident”. Section 6 of the Income-tax Act, 1961 speak about “Resident in India”. Read this section carefully to judge your residential status.

For ready reference, the exact extract of section 6 is reproduced here:

Section 6: Residence in India for the purposes of this Act,-

An individual is said to be resident in India in any previous year if he

• Is in India in that year for a period or periods amounting in all to one hundred and eighty-two days or more; or
• Having within the four years preceding that year been in India for a period or periods amounting in all to three hundred and sixty-five days or more is in India for a period or periods amounting in all of sixty days or more in that year

Update 02/02/2020

Budget 2020 Impact on NRIs

Definition of Residency has changed

– A visiting NRI (NRI & PIO) need to stay 245 days outside India rather than 182 days as used to be earlier.

So from Apr 1, 2021, resident Indian will be one who’s in India for 120 days or more.

Important To Note

The reduced period of 120 days shall apply, only in cases where the total Indian income (i.e., income accruing in India) of such visiting individuals during the financial year is more than Rs 15 lakh. A visiting NRIs whose total income (which is defined as taxable income) in India is up to Rs 15 lakh during the financial year will continue to remain NRIs if the stay does not exceed 181 days, as was the case earlier.

(Details Post Here – How Budget 2020 Impacts NRIs)

Who is “Not Ordinarily Resident”?

A person is said to be “not ordinarily resident” in India in any previous year if such person is

• An individual who has not been resident in India in 9 out of the 10 previous years preceding that year, or has been in India for less than 730 days during the 7 previous years preceding that year, or
• A Hindu undivided family whose manager has not been resident in India in 9 out of the 10 previous years preceding that year or has been in India for less than 730 days during the 7 previous years preceding that year.

Update 02/02/2020

Budget of 2020 changed the way how residency is defined. The new rules are:

Definition of NRO has also changed

Criteria of determining NOR also modified as under:
⎼ Individual who is NRI in 7 out of 10 preceding years
⎼ For HUF, the Manager has been an NRI in 7 out of 10 preceding years (Details Post Here – How Budget 2020 Impacts NRIs)

All other persons who don’t fall under any of the above categories –Resident or Not Ordinarily Resident are NRIs.

A “ Not ordinarily Resident” person is liable to income-tax in India only on his Indian income and not on his foreign income.

Now some more clarification on certain cases:

• If you are a merchant navy/crew member of Indian Ship, the number of days in the definition of Resident will change to 182 days instead of 60. That means out of last 4 years one should be in India for 365 days and in last year at least 182 days.
• For HUF, if the Karta or controller and management are situated outside India during a period it is NRI.
• A company which is Indian but control & Management for that year is outside India it is treated as NRI company.

So for HUF & Companies, the flowchart is

Who is Person Of Indian Origin?

A Person of Indian Origin (PIO) means a citizen of any country (other than Bangladesh or Pakistan), if:

1. He/She at any time has held an Indian passport or
2. He/She or either of his / her parents or grand parents was a citizen of India by virtue of the Constitution of India or Citizenship Act, 1955 (57 of 1995) or He / She is a spouse of an Indian citizen or of a person referred above.

What is an OCB?

Overseas Corporate Bodies (OCBs) are bodies predominantly owned by individuals of Indian nationality or origin resident outside India and include overseas companies, partnership firms, societies and other corporate bodies which are owned, directly or indirectly, to the extent of at least 60% by individuals of Indian nationality or origin resident outside India as also overseas trusts in which at least 60% of the beneficial interest is irrevocably held by such persons. Such ownership interest should be actually held by them and not in their capacity as nominees. The various facilities granted to NRIs are also available with certain exceptions to OCBs. But only when the ownership/beneficial interest held in them by NRIs continues to be at least 60%.

What are the various facilities available to NRI PIO OCB?

NRI PIO OCB are granted the following facilities:

1. Maintenance of bank accounts in India.
2. Investment in securities/shares of, and deposits with Indian firms/ companies.
3. Investments in immovable properties in India.
4. NRI PIO OCB are permitted to open bank accounts in India. These can be through funds remitted from abroad, foreign exchange brought in from abroad or out of funds legitimately due to them in India.

And, now, in the end, this is a small video I found on NRIs. No instrument but superb music…Enjoy it!!!

Youtube song on NRI PIO OCB

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