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CA Intermediate · Corporate and Other Laws · The Foreign Exchange Management Act, 1999

Vikram, a resident of Mumbai, is a person who left India in January 2024 for employment in Singapore and stayed there for an uncertain period. A bank in India asks whether he is a 'person resident in India' under Section 2(v) of FEMA for the financial year in which he left. The Bank relies on the income-tax residence test. What is the correct legal position under FEMA?

Vikram is a person resident outside India under FEMA. The Act excludes from residents anyone who has gone out of India for employment or for a purpose showing an uncertain stay abroad. The 182-day income-tax test and citizenship do not decide residence under FEMA.

  1. AResidence under FEMA is determined by the Income-tax Act's 182-day test
  2. BHe is a person resident outside India if he left India for taking up employment outside India, irrespective of days spent in India in the preceding yearCorrect
  3. CHe is resident in India for the year in which he left because he stayed more than 182 days in India in the preceding year
  4. DHis status is determined only by his nationality, as an Indian citizen is always resident

Explanation

FEMA defines a person resident in India by intention and purpose, not by a 182-day test. A person who has gone out of India for employment, business or vocation, or for any purpose indicating an uncertain period abroad, is not resident in India. So Vikram is a person resident outside India. The tax-law day count and citizenship are irrelevant to FEMA residence.

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