Residential Status Under FEMA
Days in India last year are only the start: purpose decides who is resident under FEMA.
Almost every FEMA rule starts with one question: is this person resident in India or not? The answer decides which accounts they can hold, whether LRS applies, whether their money is repatriable and which forms the bank files. Getting it wrong means the whole transaction sits under the wrong rules.
FEMA's test is not a simple day count. It combines days spent in India in the previous financial year with the purpose of being in, or out of, India. Purpose can override the days in either direction.
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The Section 2(v) Test for Individuals
A person resident in India is a person residing in India for more than 182 days during the course of the preceding financial year. That is the starting point, and it looks backward: residence this year depends on last year's stay.
Two exclusions then cut in. First, a person who has gone out of India or stays outside India for employment outside India, for carrying on business or vocation outside India, or for any other purpose indicating an intention to stay outside for an uncertain period, is not resident, even if they spent more than 182 days in India last year. Second, a person who has come to or stays in India for any reason other than employment, business or vocation in India, or another purpose indicating an intention to stay for an uncertain period, is not resident, even after 182 days.
Applying the Test
Resident Indian leaves in October to take up a job in Dubai
Status under FEMA
Non-resident from departure
Why
Gone out for employment outside India; the 182-day count for last year does not save residence
NRI returns to India for good to take up a job here
Status under FEMA
Resident from arrival
Why
Comes to India for employment, so the exclusion for visitors does not apply
Foreign tourist who stayed 200 days in India last year
Status under FEMA
Not resident
Why
Came otherwise than for employment, business or an uncertain stay
Company incorporated in India
Status under FEMA
Resident
Why
Clause (ii): any person or body corporate registered or incorporated in India
Indian office or branch of a foreign company
Status under FEMA
Resident
Why
Clause (iii): an office, branch or agency in India owned or controlled by a non-resident
Overseas branch of an Indian bank or company
Status under FEMA
Resident
Why
Clause (iv): an office, branch or agency outside India owned or controlled by a resident
| Situation | Status under FEMA | Why |
|---|---|---|
| Resident Indian leaves in October to take up a job in Dubai | Non-resident from departure | Gone out for employment outside India; the 182-day count for last year does not save residence |
| NRI returns to India for good to take up a job here | Resident from arrival | Comes to India for employment, so the exclusion for visitors does not apply |
| Foreign tourist who stayed 200 days in India last year | Not resident | Came otherwise than for employment, business or an uncertain stay |
| Company incorporated in India | Resident | Clause (ii): any person or body corporate registered or incorporated in India |
| Indian office or branch of a foreign company | Resident | Clause (iii): an office, branch or agency in India owned or controlled by a non-resident |
| Overseas branch of an Indian bank or company | Resident | Clause (iv): an office, branch or agency outside India owned or controlled by a resident |
Terms Built on Residence
- Person resident outside India
- Anyone who is not a person resident in India.
- NRI (Non-resident Indian)
- A person resident outside India who is a citizen of India.
- PIO (Person of Indian Origin)
- A person resident outside India who is a citizen of a country other than Bangladesh or Pakistan (or another country the Central Government specifies) and who, or whose parent, grandparent or great-grandparent, was an Indian citizen, or who is a foreign-origin spouse of such a person.
- OCI cardholder
- An Overseas Citizen of India under the Citizenship Act. For FEMA purposes, a PIO includes an OCI cardholder who is resident outside India.
Scenario questions on the 182-day test. No signup.
Assets Carried Across a Change in Status
Status can change, and FEMA protects what was acquired legally under the old status. Under Section 6(4), a person resident in India may hold, own, transfer or invest in foreign currency, foreign securities or property abroad acquired while resident outside India, or inherited from a person resident outside India. Section 6(5) is the mirror: a non-resident may keep Indian currency, securities or property acquired while resident in India, or inherited from a resident.
This is why a returning NRI can keep a flat bought in London while working there, and why an Indian who emigrates can keep the house bought in Pune before leaving. What changes is the account and repatriation treatment, which the bank must update when it learns of the change.
How CCFE Tests This
Scenario questions describe a person's movements and ask for their status. The trap is counting days in the current year, or treating 182 days as decisive: the count is for the preceding financial year, and purpose overrides it. A second trap is forgetting that companies, branches and offices have residence too. FEMA residence is also separate from income-tax residence, which has its own test.
FAQs
Who is a person resident in India under FEMA?expand_more
Broadly, a person who resided in India for more than 182 days in the preceding financial year, excluding those who have gone abroad for employment, business or an uncertain stay, and those who are in India for any other reason. Companies registered in India and Indian offices of foreign entities are also resident.
Does someone become an NRI the day they leave India for a job abroad?expand_more
Yes, for FEMA purposes. A person who goes abroad to take up employment is excluded from the definition of resident, regardless of days spent in India the previous year.
Is FEMA residence the same as residence under the Income-tax Act?expand_more
No. They are separate tests under separate laws, and a person can be resident under one and not the other.
Can a returning NRI keep assets held abroad?expand_more
Yes. Section 6(4) allows a resident to hold foreign currency, securities and property acquired while resident outside India, or inherited from a non-resident.
Next steps
- FEMA basicsarrow_forward
- OCI and PIOarrow_forward
- Returning NRI Rulesarrow_forward
- NRE vs NRO vs FCNRarrow_forward
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