FEMA Insight 101: One Person, Two Statuses - When FEMA and Tax disagree on Residency?

Under Indian Laws, being a “resident” isn’t just about where you live - it determines how much tax you pay and what you can do with your money abroad. But here’s the twist: the Foreign Exchange Management Act (#FEMA), 1999 and Income Tax Act, 1961 (#IncometaxAct) don’t see residency the same way.

That’s right — you could be a resident under tax laws and a non-resident under FEMA, or vice versa!

Here’s the catch:

➡️Income Tax Act counts days — stay in India >182 days & you’re a resident.

➡️FEMA looks at your intention — if you live abroad for employment or business, you may still be a non-resident even if you spend >182 days here.

Take Anita’s example: She works in Singapore but stayed 200+ days in India to care for her parents.

— Income Tax treated her as resident & taxed global income.

— But FEMA saw her as non-resident (since her job & intent are abroad).

But the question is how it affects her? Well, this simple classification can make her ineligible under FEMA to use Liberalized Remittance Scheme (LRS) to invest $250k abroad. 

𝗧𝗶𝗽𝘀 𝘁𝗼 𝗡𝗮𝘃𝗶𝗴𝗮𝘁𝗲 𝘁𝗵𝗲 𝗖𝗼𝗻𝗳𝘂𝘀𝗶𝗼𝗻:

• Track days, purpose, and employment clearly

• Review status under both laws every year

• When unclear, take the more conservative position

• Seek advice before big transactions

#FEMA #IndianTaxLaw #ResidentialStatus #PRI #PersonresidentinIndia #TaxCompliance #CrossBorderTax #IndianResident #NonResident #TaxPlanning #LegalCompliance #IndianLaw #ComplianceManagement #TaxAdvisory #Linkjuris

When law & business needs clash, clarity is your best defense. 

Read the complete article, with practical examples, on Substack: https://rajnishnotes.substack.com/p/residency-fema-vs-tax?r=77wna

Exploring the nuances of residency status conflicts between FEMA regulations and tax laws, this article provides insights into navigating dual statuses.