The Income-tax Act 2025 took effect from 1 April 2026. For non-resident Indians, the headline news is that the core 182-day residency rule has not changed — the structural changes are at the edges, and they catch out high-income NRIs and Persons of Indian Origin who treat their India visits as a casual schedule. This is what to watch.
The 182-day rule — still the anchor
An individual is a resident in India for a tax year if they are physically in India for 182 days or more in that tax year. This rule is unchanged under ITA 2025. For most NRIs — those working overseas, posted abroad on assignment, or settled outside India — staying under 182 days is the simple test of remaining a non-resident.
The 60/365-day secondary rule — relaxations for NRIs
The Act also has a secondary trigger: if an individual is in India for 60 days or more in the tax year and 365 days or more across the four preceding tax years, they become resident. Two important relaxations from this 60-day trigger:
- NRIs and Indian citizens working abroad — the 60-day threshold is relaxed for those who leave India during the year for the purpose of employment outside India, or who are members of the crew of an Indian ship. They get the 182-day test only.
- NRIs and PIOs visiting India — the 60-day threshold is also relaxed for those visiting India in the year, subject to the high-income carve-out below.
The 120-day trap for high-income NRIs
This is where ITA 2025 (carrying forward the rule introduced under the 1961 Act) tightens the screws on high-earners:
If you are an Indian citizen or PIO visiting India, and your total income from Indian sources exceeds ₹15 lakh in a tax year (excluding income from foreign sources), then your 60-day threshold is replaced by 120 days. Stay 120 days or more in India in the tax year, with 365 days or more over the prior four tax years, and you become a resident.
For high-income NRIs who like to spend the November-February stretch in India for family or weather reasons, this is the rule that catches them. Tracking days carefully matters.
The deemed residency rule — for stateless income
Section 6(1A) of the 1961 Act, carried into ITA 2025, deems an Indian citizen to be a resident in India for the tax year if:
- their total income (other than from foreign sources) exceeds ₹15 lakh, AND
- they are not liable to tax in any other country by reason of their domicile or residence.
This rule was designed to catch the small set of individuals who structure their lives to be tax-resident nowhere. If you are an Indian citizen earning more than ₹15 lakh from Indian sources and you live somewhere with no tax (a few Gulf states, certain Caribbean jurisdictions), this rule deems you resident in India by default. You become liable to Indian tax on your global income.
Note: it does not apply if you are tax-resident anywhere — a UAE, Bahrain or Cayman residency under their local rules, evidenced by a Tax Residency Certificate, takes you out of the deemed-resident bucket.
DTAA — the safety net
India has Double Taxation Avoidance Agreements with most major economies including the US, UK, UAE, Singapore, Mauritius, Canada, Australia and Germany. To claim DTAA benefits in India:
- Obtain a Tax Residency Certificate (TRC) from the country of which you claim to be resident.
- File Form 10F electronically on the Indian income-tax portal disclosing your TIN, status, period of residency etc.
- Apply the relevant article of the DTAA when computing tax on each income head.
For NRIs in countries with strong DTAA networks, the practical effect is often:
- Indian-source rental income — taxable in India, with credit available in your country of residence.
- Interest from NRO accounts — taxable in India at 30% domestic rate, but capped at lower DTAA rates (typically 10-15%) on producing TRC + Form 10F.
- Capital gains on Indian shares — taxable in India under domestic law; some DTAAs allocate exclusive taxing right to country of residence (the Mauritius and Singapore protocols partially erode this).
- Salary for services rendered abroad — not taxable in India for NRIs, with the standard short-stay exception.
Returning NRIs — RNOR status
If you are returning to India after a long stint abroad, you may qualify as Resident but Not Ordinarily Resident (RNOR) for two years before becoming a full Resident. RNOR status protects foreign income (other than business controlled from India or profession set up in India) from Indian tax. Conditions:
- You were a non-resident in 9 of the 10 preceding tax years, OR
- You were in India for 729 days or fewer in the 7 preceding tax years.
The RNOR window is one of the most valuable planning levers for returning NRIs — use it to liquidate or restructure foreign assets before they become India-taxable.
What we recommend
- Track your India days. A spreadsheet is enough. The cost of misjudging a few days is becoming a global-income taxpayer for the year.
- If you are a high-income NRI visiting India, watch the 120-day trip total. Especially in winter when family schedules pull people back for events.
- Get a TRC each year from your country of residence and file Form 10F early in the Indian tax year.
- Plan your return. If you are moving back to India in the next 1-2 years, structure foreign asset disposals, stock-option exercises and pension lump-sums to fall in your RNOR years.
- Don’t rely on the deemed-residency exemption if you are in a no-tax jurisdiction without a TRC. Documentation matters; the burden of proof is on the taxpayer.
If you are an NRI and would like to walk through your specific residency status, the Indian-source vs foreign-source split, and DTAA application for FY 2026-27, write to us at [email protected].
Sources
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