Chartered Accountant · ICAI M.No. 153926 · FRN 136869W
Two laws, two tests
The Income-tax Act decides residency by counting days in India over the financial year. FEMA looks instead at whether you are in India for an uncertain or indefinite period — essentially your intention — and can switch your status from the day you leave or return for an open-ended stay.
Why the difference matters
FEMA status governs your bank accounts and investments — whether you may hold NRE/NRO accounts, buy certain assets, or repatriate funds. Income-tax status governs what is taxed. Because they move on different triggers, your accounts may need redesignation under FEMA before your tax status changes, or the other way round.
A worked example
Example: you take a job abroad and leave India in May with an open-ended plan. Under FEMA you become a non-resident almost at once, so you can open NRE/NRO accounts. But under income tax, if you had already spent over 182 days in India before leaving, you may still be a resident for that year. The two simply answer different questions — FEMA asks ‘which accounts and assets may you hold?’, income tax asks ‘what is taxable?’. Getting them out of step is a common cause of trouble: holding a resident savings account while still an NRI under FEMA, or leaving an NRE account running after you have returned for good, can both create compliance issues. Confirm both statuses when you move. Our NRI & FEMA service can map them.