NRIs face residency test upon India return, must stick to 182-day rule

Given the lack of legal clarity in India around status, assuming they are residents immediately after return could invite penalties and prosecution

A recent appellate tribunal ruling has complicated matters for non-resident Indians (NRIs) returning to India by replacing the Reserve Bank of India’s (RBI) intent-based residency test with the Foreign Exchange Management Act’s (Fema) stricter requirement. Until clarity emerges, NRIs should exercise caution and avoid major financial transactions not fully compliant with FEMA regulations.

 

What is the controversy?

 

Section 2(v)(i) of FEMA includes two tests for residency. The first requires a physical stay of 182 days in the preceding financial year. The second, which is intent-based, allows residency even without meeting the 182-day rule if the intention to reside in India