NRI Full Form and Meaning
NRI stands for Non-Resident Indian. This term describes Indian citizens who primarily live and work outside India. Being an NRI changes how your taxes work and what investment rules apply to you.
Different Indian laws define NRIs in slightly different ways. Tax laws look at how many days you spend in India, while foreign exchange laws look at why you're living abroad.
Both of these rules matter when it comes to having a bank account, sending money outside and to India, buying property, and investing in Indian assets like property and mutual funds.
Who is considered an NRI?
An NRI is any Indian citizen who lives outside India for work, study, or other long-term purposes. You can still be an NRI even if you keep your Indian citizenship and passport.
Under foreign exchange laws (FEMA), you're an NRI if you're an Indian citizen living outside India for:
A job outside India
Running a business outside India
Studying at a foreign university
Any other reason that shows you plan to stay outside India for a long time
FEMA law cares more about why you're abroad than exactly how many days you've been away. These rules affect how you can handle money across borders, make investments, and use bank accounts.
For example, if you moved to Canada for a job in 2025, you'd become an NRI after staying there for 182 days, even if you still have your Indian passport and own property in Mumbai.
NRI definition as per the Income Tax Act
According to Section 6 of the Income Tax Act, an NRI is "an individual who is not a resident in India." The law says you're a resident of India for a financial year if either:
You stay in India for 182 days (about 6 months) or more during that financial year. OR
You stay in India for 60 days or more during that financial year and 365 days or more during the four years before that.
If you leave India for the purpose of employment, the first rule (182 days) applies to you instead of the second one.
If you don't meet either condition, you're classified as an NRI for tax purposes. Your citizenship and passport don't affect this status - it's all about where you physically spend your time.
Recent changes from the Finance Act 2020 added the concept of "deemed residency". If you're an Indian citizen making more than ₹15 lakhs from Indian sources, the 60-day time frame will be replaced by the 120-day time frame in the second rule for residency status.
What makes you an NRI?
There are two laws that determine whether you are an NRI or not. For taxation purposes, the income tax law is applicable, and for banking and finance aspects, the Foreign Exchange Management Act (FEMA) is applicable.
Based on Indian laws, two main factors determine if you're an NRI:
1. How long you stay outside of India
According to the IT (Income Tax) law, you're an NRI if:
You live outside India for more than half a year (182 days or more) OR
You spend less than 60 days in India in a year and haven't lived in India much during the past four years (less than 365 days total).
2. The reason why you're staying abroad:
According to FEMA law, you're an NRI if:
You're working at a job outside India
You're running your own business abroad
You're studying at a foreign university or college
You've moved abroad with plans to stay for a long time
Tax laws focus mainly on counting days, while foreign exchange laws care more about your reason for being abroad. It's possible to be an NRI under one law but not the other, though usually, if you meet either test, you're treated as an NRI for most purposes.
For example: If you left India on October 1, 2024, you would need to stay abroad until at least March 31, 2025, to qualify as an NRI for the financial year 2024-25.
You can check your NRI residential status with Belong's Residential Status calculator.
Employment, Residency or Education Abroad explained
Working or studying abroad with proper documentation creates immediate NRI status. Employment contracts with foreign companies qualify you as an NRI automatically. Educational enrollment at overseas institutions also establishes NRI status promptly.
Documentation required: Keep copies of your employment contract, visa, foreign tax identification, and residence proof to simplify NRI status verification with Indian banks and tax authorities.
Difference Between Resident and NRI
The Income Tax Act creates three categories of residency status:
Resident and Ordinarily Resident (ROR): You have lived in India majorly and do not satisfy the 182-day rule, 60-day and 365-day rule.
Resident but Not Ordinarily Resident (RNOR): You have stayed in India more than 182 days in the previous financial year and were not a resident in the last 2 years out of 10 previous years.
Non-Resident Indian (NRI): You don't meet the basic residence rules.
These categories affect how you're taxed: RORs pay taxes on their international income. RNORs pay tax on income earned in India and income from a business controlled in India. NRIs only pay taxes on money earned within India.
Let us take an example to understand the tax impact. If you earn ₹50 lakhs in the US and ₹10 lakhs from property in India, as an NRI, you pay Indian taxes only on the ₹10 lakhs. A resident would be taxed on the entire ₹60 lakhs.
Common Misconceptions About NRI status
One of the common misconceptions about NRIs is that having foreign citizenship or living abroad for some time does not make one an NRI. In addition to this, property ownership in India does not prevent or establish NRI status. Temporary foreign visits for tourism or short business trips don't grant NRI status.
It is important to refer to the tax rules of income tax and the FEMA act so that you are compliant in all your dealings in India.
Check the Belong NRI Compliance Tool to answer all relevant questions in matters of compliance, including your bank accounts, investments in the stock market, mutual funds, and properties in India.
