Microlesson · 5-min read

FEMA - Definition of 'Person' and 'Person Resident in India'

# Definition of 'Person' and 'Person Resident in India' under FEMA, 1999

## 1. Definition of 'Person' [Section 2(u)]

The term 'person' under FEMA includes a wide range of entities:

Type	Examples
Natural persons	Individuals
Corporate entities	Companies
Partnerships	Firms
Joint families	Hindu Undivided Family (HUF)
Collective bodies	Association of Persons (AOP)
Legal fictions	Artificial juridical persons
Extensions of persons	Agencies, offices, branches

### Why agencies/offices/branches are included

Agencies, offices and branches do not have an independent legal status separate from their owners. However, FEMA specifically brings them within the definition of 'Person' so that residential-status rules can apply to them.

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## 2. Definition of 'Person Resident in India' (PRII) [Section 2(v)]

A PRII includes:

1. An individual residing in India for more than 182 days during the preceding financial year — subject to two carve-outs (below).

2. Any person or body corporate registered or incorporated in India.

3. An office, branch or agency in India owned or controlled by a person resident outside India (PROI).

4. An office, branch or agency outside India owned or controlled by a person resident in India.

Citizenship is NOT the test. Indian/foreign citizenship is irrelevant.

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## 3. The Three-Limb Test for Individuals

### Limb 1 — Basic threshold

A person residing in India for more than 182 days in the preceding financial year is a PRII.

> Example: To determine residential status for FY 2022-23, look at stay during FY 2021-22.

### Limb 2 — Carve-out (Clause A): Persons going OUT of India

A person who has gone out of, or stays outside, India for any of the three purposes is NOT a PRII (from the date of departure):

1. For or on taking up employment outside India

2. For carrying on a business or vocation outside India

3. For any other purpose in such circumstances as would indicate stay outside India for an uncertain period

### Limb 3 — Carve-out (Clause B): Persons coming INTO India

A person who has come to or stays in India OTHERWISE THAN for any of the same three purposes is NOT a PRII, even if his stay exceeds 182 days.

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## 4. Residential Status is From a DATE, Not for a Year

Unlike Income-tax law (which determines status for the whole previous year), FEMA is a regulatory law. Status must be known at the time of each transaction so commercial parties can transact with certainty.

> If a person comes to India on 1 June 2021 for employment, he is a PRII from 1 June 2021 — not from the next financial year.

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## 5. Limbs 2 & 3 Apply ONLY to Individuals

HUF, AOP, BOI, artificial juridical persons cannot 'take up employment', 'go out of India' or 'come to India'.
They do not fit the second/third-limb tests.
Practically, if such entities operate in India, they are treated as Indian residents.

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## 6. Rules for Body Corporates, Offices, Branches

Entity	Status
Body corporate registered/incorporated in India	PRII
Branch/office/agency outside India owned or controlled by PRII	PRII (cannot escape FEMA by setting up overseas branch)
Branch/office/agency in India owned or controlled by PROI	PRII (so Indian residents can deal with it freely)

The last rule is critical — if a foreign company's Indian branch were treated as PROI, every domestic dealing with that branch would attract FEMA.

Worked example

### Example 1

Q. Mr. A — Coming to India for Employment

Mr. A resided in India during FY 2019-20 for less than 182 days. He came to India on 1 April 2020 for employment. Status for FY 2020-21?

Answer: On the basic 182-day test (Limb 1), Mr. A fails — he did not stay >182 days in FY 2019-20. However, Limb 2 (Clause B carve-out, read positively) applies: he has come to India for employment, which is one of the three purposes. Hence he is a PRII from 1 April 2020.

### Example 2

Q. Mr. X — Business, Then Leaving India

Mr. X stayed <182 days in FY 2019-20. Came to India on 1 April 2020 for business. Intends to leave business on 30 April 2021 and depart India on 30 June 2021. Status for FY 2020-21 and FY 2021-22?

Answer:

FY 2020-21: PRII from 1 April 2020 (came for business — covered by Limb 3 positive test).
FY 2021-22: PRII from 1 April 2021. From the date he departs (30 June 2021) — if he leaves for employment/business/uncertain stay abroad, he ceases to be PRII from that date. Otherwise he continues as PRII.
Foreign citizenship is irrelevant; the purpose of departure decides.

### Example 3

Q. Mr. Z — Student Going Abroad

Mr. Z resided in India in FY 2019-20 (>182 days). Left India 1 August 2020 for USA for 3 years of higher studies. Status for FY 2020-21 and FY 2021-22?

Answer:

FY 2020-21: Going for studies is technically not employment/business/uncertain-period stay. On a strict reading he remains PRII. However, RBI's AP Circular No. 45 dated 8 December 2003 clarifies that students are treated as non-residents (because they typically start working abroad to fund their stay).
FY 2021-22: He was not in India >182 days in preceding FY 2020-21. So he is not PRII.

### Example 4

Q. Toy Ltd. — Branch Structure

Toy Ltd. is a Japanese company with a robotic unit headquartered in Mumbai, which controls a Singapore branch. Status of the Mumbai unit and the Singapore branch?

Answer:

Toy Ltd. (Japanese co.) = PROI.
The Mumbai robotic unit is a branch in India owned/controlled by PROI → under Section 2(v)(iii), it is a PRII.
The Singapore branch is controlled by the Mumbai unit (which is itself a PRII) → under Section 2(v)(iv), branches outside India controlled by PRII are also PRII. Hence the Singapore branch is also PRII.

### Example 5

Q. Miss Alia — Airhostess Based in Mumbai

Miss Alia, British Airways airhostess employed in UK, was based at Mumbai for more than 182 days in the FY due to security considerations. Residential status?

Answer: Although her stay exceeds 182 days (Limb 1 satisfied), she did not come to India for employment/business/uncertain-period stay — she is employed in UK. Section 2(v)(B) excludes her. Hence she is NOT a PRII.

Counter-case: If she were employed at the Mumbai branch of British Airways, she would be a PRII.

⚠️ Common exam mistakes

Treating citizenship as the test for residential status — citizenship is irrelevant under FEMA.
Applying the 182-day test to the current year instead of the preceding financial year.
Forgetting that residential status under FEMA is determined from a specific date, not for the whole financial year (unlike income-tax law).
Assuming a student going abroad remains PRII based on the strict statutory reading — overlooking RBI's AP Circular No. 45 dated 8 December 2003 which treats students as non-residents.
Believing that setting up a branch outside India helps escape FEMA — a branch outside India owned/controlled by a PRII is itself a PRII.
Treating an Indian branch of a foreign company as PROI — it is actually a PRII under Section 2(v)(iii).
Applying the 'three purposes' test to HUF/AOP/BOI — these limbs apply only to individuals.

Bare-Act text Sections 2(u), 2(v) and 2(w) · The Foreign Exchange Management Act, 1999 · click to expand

Section 2(v) — 'Person resident in India' means— (i) a person residing in India for more than one hundred and eighty-two days during the course of the preceding financial year but does not include— (A) a person who has gone out of India or who stays outside India, in either case— (a) for or on taking up employment outside India, or (b) for carrying on outside India a business or vocation outside India, or (c) for any other purpose, in such circumstances as would indicate his intention to stay outside India for an uncertain period; (B) a person who has come to or stays in India, in either case, otherwise than— (a) for or on taking up employment in India, or (b) for carrying on in India a business or vocation in India, or (c) for any other purpose, in such circumstances as would indicate his intention to stay in India for an uncertain period; (ii) any person or body corporate registered or incorporated in India, (iii) an office, branch or agency in India owned or controlled by a person resident outside India, (iv) an office, branch or agency outside India owned or controlled by a person resident in India. Section 2(w) — 'Person resident outside India' means a person who is not resident in India.

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