Introduction

Under FEMA, residential status is not fixed for a single point in time but is an ongoing status relevant to whether a person can undertake certain foreign exchange transactions at that particular moment. For example:

• Only NRIs (Non-Resident Indians) can maintain NRE/FCNR accounts.
• NRIs can borrow freely from foreign banks, while residents face restrictions.

Hence, knowing residential status at the time of transaction is crucial.

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1. Definition of ‘Person’ under FEMA

A Person includes:

• Individual
• Hindu Undivided Family (HUF)
• Company
• Firm
• Association of Persons (AOP) / Body of Individuals (BOI)
• Artificial juridical person not in above categories
• Agency, office or branch owned or controlled by such persons

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2. Classification of Persons for Residential Status

FEMA classifies persons into:

• Individual
• Persons other than individuals (companies, firms, LLPs, HUF, trusts, cooperatives, etc.)
• Office, Agency, or Branch

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3. Types of Residential Status under FEMA

• Person resident in India
  Determined by stay (for individuals) or place of incorporation/control (for entities).
• Person resident outside India
  Anyone who does not qualify as resident in India under FEMA is a non-resident.

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4. Residential Status of Different Persons

4.1 Individual

• Resident if physically present in India for more than 182 days in the preceding financial year (April 1 – March 31).
• Exceptions apply (e.g., individuals coming for employment).

4.2 Persons other than Individuals

• Resident if registered/incorporated in India.

4.3 Office, Branch or Agency

• If outside India but owned/controlled by a resident person → deemed resident in India.
• If situated in India but owned/controlled by non-resident → deemed resident in India.

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5. Meaning of ‘Owned’ or ‘Controlled’

Though FEMA doesn’t define these terms, FDI Policy 2020 and NDI Rules 2019 define:

• Owned: More than 50% beneficial ownership by resident Indian citizens/companies ultimately owned by resident Indians.
• Control: Right to appoint majority directors or control management/policy decisions through shareholding or agreements.

Note: The term emphasizes resident Indian citizen status, not just residency.

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6. Summary Table

Person Type	When Resident in India	When Resident Outside India
Individual	Stay in India > 182 days (preceding FY)	Stay in India ≤ 182 days
Company	Incorporated in India	Incorporated outside India
Firm or LLP	Registered in India	Registered outside India
Cooperative Society	Registered in India	Registered outside India
Trust	Registered in India	Registered outside India
Office, Branch or Agency	Situated in India OR owned/controlled by resident person	Situated outside India AND owned/controlled by non-resident

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7. Difference Between Residential Status under FEMA and Income Tax Act

Aspect	FEMA	Income Tax Act
Reference Year	Preceding Financial Year (Apr 1 – Mar 31)	Current Financial Year (Previous Year)
Period of Stay	>182 days (must be more than 182, i.e., 183+)	≥182 days
Intention of Stay	Intention to stay or leave India is critical	Based purely on number of days physically present
Result	Ongoing determination relevant to transactions	Relevant for taxability of income in a year

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8. Practical Example

• An individual staying 182 days in India:
  • Resident under Income Tax Act (since ≥182 days).
  • Non-resident under FEMA (needs more than 182 days).
• An Indian resident who leaves India for a job abroad on Nov 3:
  • Becomes non-resident under FEMA from Nov 3 (intention to stay abroad).
  • May still be resident under Income Tax Act for that year.

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9. Conclusion

• FEMA residential status depends on physical presence in the preceding financial year and intention to stay.
• Residential status under FEMA is transaction-specific and ongoing.
• It impacts the ability to undertake foreign exchange transactions, maintain accounts, borrow, remit funds, etc.