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NRI Status Facts
Myths and Facts About NRI Status

“Indians go abroad for studies, better career opportunities and earning money. But it is important that they do not have any misconceptions about NRI status and its financial implications in India. Let’s check the common myths & the actual facts.”

Myth No.1 – I am an NRI and I do not have a tax liability


NRIs are liable to pay tax on the income received or accrued in India even if they are not living in India. Here is a simple table to make this clear –

Residential Status Indian Income Foreign Income
Non-Resident Indian (NRI) Taxable in India Not Taxable in India
Resident and Not Ordinarily Resident (RNOR) Taxable in India Not Taxable in India up to 2-3 years.

Tax then depends on DTAA.

Resident and Ordinarily Resident (ROR) Taxable in India Taxable in India

NRI Status Myths and Facts

Check – What will happen to NRE FD after NRI return to India?

Myth No. 2 – All NRI bank accounts are the same


There are three types of accounts for NRIs –

NRE (Non-Resident External Account) – It can be opened in a foreign currency and maintained in INR. Interest earned on this account is tax-free. It cannot be held jointly with a resident Indian. The amount is fully repatriable.

NRO (Non-Resident Ordinary Account) – It is INR account – similar to a normal savings bank account. The NRI has to pay tax on interest earned on this account.

FCNR – It is for term deposits. It can be opened by NRIs and held jointly with resident Indians. Principal and interest amounts are tax-free. It can be maintained till maturity even if the status of the person holding the account changes from NRI to Resident Indian.

“It’s illegal for NRIs to continue Resident Savings Account.” wiseNRI

Myth No. 3 – Power of Attorney can be given only to relatives

Fact –

It is not always mandatory to give power of attorney to only relatives. In many cases, it can be given to people whom you trust.

Myth No. 4 – I cannot get a loan in India as I am an NRI

Fact –

NRIs can avail for loans in India. They can take loans to buy residential properties, commercial properties and for buying land for residential purposes. There are some more steps in the process of assigning a Power of Attorney and the tenure of the home loan is usually between 5-15 years.

Car loans are given to NRIs only residing in certain countries. Some banks allow the NRI to be a guarantor but the owner of the car has to be a resident Indian. Other banks have restrictions of age or require a mortgage.

Myth No. 5 – As an NRI, I cannot apply for a  joint loan with a resident Indian and will have to visit India for getting the loan

Fact – 

An NRI and a resident Indian can jointly apply for a loan. For some countries, there is extra documentation to be submitted. The loan will be considered as an NRI loan where the principal borrower will be the NRI. The EMI payments would have to be done through an NRI account.

Many banks complete the process and documentation without requiring the NRI borrower to visit India.

Read – Investment Options for NRIs

Myth No. 6 – NRIs cannot invest in stocks and MFs


An NRI can invest in direct equity. He needs to open an NRE or NRO account. This can be linked to a demat account which can be opened with any registered stock broker in India or Bank. He needs to have a trading account for the purchase and sale of shares and cash inflow and outflow. (Portfolio Investment Scheme is also an option)

Stocks -The rate of tax on dividend income of non-residents, as per the Indian Income-tax Act, 1961 , is 20% (plus applicable surcharge and cess). Long-term capital gains are taxable at 10%(in excess of Rs 1 Lakh). Short-term gains (less than 1 year) are taxable at 15%.

[thrive_icon_box color=’orange’ style=’1′ image=’https://www.wisenri.com/wp-content/uploads/2018/02/NRI.png’]NRIs except from U.S and Canada can invest in all Mutual Funds in India. NRIs from US and Canada have certain restrictions and can buy only a select few Mutual Fund schemes.[/thrive_icon_box]

Mutual fund units are treated as capital assets and attract capital gains tax in India. Taxation is similar to resident Indian but TDS is applicable on capital gains.

This post is written by Vidya – she is NRI.

Hope this post helps in differentiating fact from fiction about NRI Status. I know there are many more myths – please share in the comment section, this can help other readers.

Must share this post with your NRI friends.

Published on February 12, 2018

Hemant Beniwal

Hemant Beniwal is a CERTIFIED FINANCIAL PLANNER and his Company Ark Primary Advisors Pvt Ltd is registered as an Investment Adviser with SEBI. Hemant is also a member of the Financial Planning Association, U.S.A and registered as a life planner with Kinder Institute of Life Planning, U.S.A. He started his Financial Planning Practice in 2009 & is among the first generation of financial planners in India. He also authored Bestseller book "Financial Life Planning". 

  • I am retired 76 years old n staying in dubai for ovrr 6 months. I have no income in Dubai. What is my status n tax libilty as i get rent in india

  • I am a Singaporean, do i consider my myself as an NRI or NRO. As Both my parents are born in India but converted to Singapore Citizens but are no longer around

  • Sir, Iam residing in Bahrain, a gulf country, and I have been investing in mutual funds SIP from my indian savings bank Sir, Iam residing in Bahrain, a gulf country, and I have been investing in mutual funds SIP from my indian savings banaccount (Not NRE). account (Not NRE).

  • I am OCI. U.S. Citizen. Wants to retire in India. Expenses are met with Social Security and RMD from IRA. Age 83. In Good Health.Spend less than 180 days since last five years. Do I need to go through the cycle of NRI, RNOR and ROR for tax computation.Please note My parents were in Kenya. I went to study in U.S. and become Naturalized U.S. citizen.Like all foreign citizen I believe that I dont have to pay any tax if I don’t have any income in India but spend my retirement income of U.S. Kindly reply to my questions?

  • I am interested in senior retirement homes with independent living,assisted living and nursing home facilities . I am 85 years old and NRI from usa

  • I am going to usa for job. When , how and to whom should I declare my NRI Status. Specifocally for IT dept and Banks where I have savings, FD accounts

  • I am an NRI, lives in Australia. My friend in India would like to send a cash gift to me. Is there any limit on this gift? How much are the charges?

  • I am NRI. If my father sell his property situated in India. How much he can give to me out of the sale and what would be tax implications?

  • In one taxable year – can I deduct Short term capital loss against the long-term capital gain after the sale of shares. I am an NRI- OCI.


  • I am holding an Indian Passport and holding a PR card from Canada. I live in India for more than 182 days and file income tax returns as a resident. I have no income in Canada but filling returns of NIL income. In near future, I wish to apply for Canadian citizenship and I will have to surrender my Indian passport. Now I have some properties in India and Bank FD. Shall I dispose of my Properties before I take citizenship? Can I convert my FDs into an NRO account and then an NRE account? At present, I don’t have an NRE or NRO account, Or shall gift all FDs and properties to my daughter in India? Any tax implications?

  • For “RNOR”, Foreign income is not taxable for 2-3 years.
    What is the definition for Foreign Income ?
    Does the interest earned from the NRE deposit considered as Foreign Income ?

    • Your account will be blocked, in the sense that you cannot do any withdrawal transactions. Deposits into the account are not restricted. Usually you will get a notification from the bank advising you of a cut-off date by which the account will be blocked. The KYC can be done on line, but once the account gets blocked it is a herculean task to get it unblocked. Each bank has its own rules in this context


  • Is the interest accruded on NRE and FCNR deposits considered aS foreign income during RNOR status or Indian income for income tax purpose.

  • What is the taxation when selling a residential property which has been bought with funds from an NRE account but the house is in the joint names of NRE and a resident India ?

  • My sister owns a shop in India. She lives in UK. I take it that she is classed as NRI? Does she pay tax on Rent income which a around 3,000 Rs per month.

    • Hi Nilakantapillay,

      As per my knowledge, Nri needs to submit their permanent address proof in case of investment.

  • An NRI getting alimony in India on the mutual divorce petition. As this lumpsum amount is non-taxable. Please tell me can I deposit cheque of this amount in my nre account in India or should I deposit in nro account?

  • My another question is can I transfer my PPF maturity amount which is going to mature on 01-04-2020 in my nre account directly as no tax to be paid on this amount in India?

  • Just a further addition to the above: The above applies to NRO account only, but for NRE accounts, the requirement of NRE-PIS account is still mandatory

  • Comment on Myth No6;NRI cannot invest in MF/Stocks
    NRI can invest in MF/Stock. At the time when I did this in the year 2011 there was no special requirement for investing in MF, but there were RB Guidelines for participation in secondary market( Investing in Stocks). For the NRE a/c one has to open a corresponding NRE-PIS a/c (you cannot have more than one NRE-PIS a/c) and a Demat Account (Demat Participant/Broker). Transactions under this will only be thru funds received from abroad into the NRE account
    If one has funds in the NRO account and intends to participate in the stock market, or if one had purchased shares while in INDIA before becoming an NRI, a NRO-PIS account and a Demat Account (DP)is necessary to formalize the existing shares. One cannot have more than one NRO_PIS a/c.
    The opening of the -PIS accounts is coordinated between the Bank and DP
    The actual transactions are straight forward and were explained by the bank/DP

      • After posting my comment, I came to know that for NRO accounts the NRO-PIS account is not required for trading in stock market. Apparently this change came in 2 years ago. Thus funds transfer for any buying/selling of shares is between your NRO account with the bank and the Trading account with the Demat Broker and the it appears that intermediate NRO_PIS account requirement is eliminated. Unfortunately neither the Bank nor the Broker advise the client of these changes and one learns the hard way. This is based on my experience a week ago. Now I have to contact my bank to close the PIS account for which I am paying Rs 1000 as annual maintenance charges
        Feb 19, 2020

  • A person holding Green card frequently visit bet India and USA . Some time more than 180 days some time less than it and spend some time more than 108 days.
    It is necessary to hold NOR savings a/c or continue with his normal savings account to avoided frequent change of status.

    • Considering that you are a green card holder, I presume that you file your IT returns every year in USA, as a USA resident. It is more appropriate that your Indian Savings account be treated as NRE or NRO. The status change is only required once you are no longer an NRI. If you stayed in INDIA for more than 182 days (now being contemplated to be reduced to 120 days) in a FINANCIAL YEAR (April 1, 2xxx- March 31, 2xxy) then I presume you will have to also file IT return in INDIA. An indian CA will be able to advise you on the tax implications

  • I am working in Thailand for the last 15 years but I never claimed NRI status. I go to India evry year and I will take USD and convert into IRS and and deposit in my INDIAN SB Account. Any issues in this?

    • My understanding is that there is no limit, except that there will be a mandatory Tax Deduction at Source (TDS) on the interest credited to your NRO account from these FDR’s. this TDS rate is ~32%. If you wish to reclaim this TDS you will need to file Tax returns in INDIA to include all your Indian Income.

  • RBI has permitted to hold FCNR-B deposits till first maturity after NRI becomes RI, although, interchangeability from fcnr to rfc and vice versa is very simple and without any penalty. Such being the situation, why RBI has permitted to hold FCNR-B, as it is till its first maturity. Does it provide any tax exemption on the interest.
    Please highlight the reasons why RBI has permitted so


  • Nice piece of information Mr. Hemant.

    Can you please advise if a NRI father can open a PPF account in the name of a minor resident kid in India ?

  • One of my relative became NRI in 2014. He left the company in August 2018 after working for about 13 years During last 4 years as NRI he contributed to his PF from his foreign salary.
    Now his company has paid him his PF and Gratuity in his salary account which is a NRO acc.
    Now he wants to convert this. Amount into his NRE account. Can he do so by submitting forms 15 CA and CB as informed by CA. Please advise

  • I work in Merchant Navy .Normally stay in India for less than 182 days.Remaining time I work on ship.So eligible for NRI.
    My question is if I am short of mandatory stay outside india for NRI status i.e.184 days by few days; is it possible for me to go on holidays abroad to complete my NRI time?
    Is is a viable option to maintain NRI status?

    • Hi Vinay,

      This is an interesting question – I know people have done this in past by taking holidays abroad & for that matter even misusing that root in Nepal. I am not sure if this trend is still continuing. Even if it is there – it’s illegal “to go on holidays abroad to complete my NRI time”.

      Even if we go by basic definition “An Indian Citizen who stays abroad for employment/carrying on business or vocation outside India or stays abroad under circumstances indicating an intention for an uncertain duration of stay abroad is a non-resident.”

      So Only days when you went out of India for the job, will be counted.

  • Please advise how to change the status from NRI to RNOR. To whom we need to approach and with what documents to change status.

  • Recently Indian Govt brought LTCG for MF investments. Gain avove Rs.1 lac is now taxable. For an NRI, how do the LTCG deducted.? Is it like TDS deduction from NRO FD A/c.? Will they deduct 10% from all redemption proceeds and then we will have to claim it.?

      • I have a different understanding based on my recent experience. For STCG there is no doubt as there is no exemption and the full STCG was subject to 15% TDS. But for LTCG, unless that specific transaction results in a CG of more than Rs 1,00,000 there is no TDS. There will be TDS for any CG above Rs 1,00,000 in that Specific transaction at 10% rate

  • Update this:
    Dividend Income is not taxable. Long term capital gains are taxable at 10%. Short term gains (less than 1 year) are taxable at 15%.

    Dividend s NOW TAXABLE, ….

      • Date on which the comments are posted will help provide a better response. My understanding is LTCG on sale of shares/stocks is taxable at 10% only if the LTCG exceeds Rs 100,000 (from FY 2018 onwards). Previous to FY 2018 the entire LTCG on sale of shares/stock was tax free and did not even form a part of computation of total income. In the budget of Feb 2020, dividends from shares are now required to be included in the computation of total income (From FY 2020 onwards) and taxed at the appropriate Tax slab
        Date:Feb 11, 2020

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