With increasing global mobility, many Indians living abroad ask: “Am I still a Non-Resident for tax purposes in India?” The answer depends not on your citizenship but on your residential status as defined by Indian tax laws. This classification directly impacts what income you must report and pay tax on in India.
Understanding when an Non-Resident becomes a resident for tax purposes is critical to avoid unexpected tax liabilities or penalties. Your residential status determines whether your global income is taxable in India, what forms to file, and your disclosure obligations.
This comprehensive guide explains:
– The tax rules for determining residential status in India
– Updated criteria under Section 6 of the Income Tax Act (FY 2024–25)
– Real-life examples of residency determination
– Tax implications of becoming a resident
– Practical tips to plan your tax residency status
For professional guidance, explore our NRI & HNI Private Client Services or reach out via Contact Us.
Why Residential Status Matters for Tax in India
Your residential status affects:
– The scope of income taxable in India (Indian income vs. global income)
– Your filing obligations (which ITR form to use)
– Reporting requirements for foreign assets and income
– Eligibility for tax relief under Double Taxation Avoidance Agreements (DTAA)
Key Definitions
1. NR (Non-Resident): An individual who does not meet residency criteria under the Income Tax Act. Only income received or given in India is taxable.
2. Resident but Not Ordinarily Resident (RNOR): Transitional resident status with limited taxability of foreign income for up to two years.
3. Resident and Ordinarily Resident (ROR): Fully taxable in India on global income with disclosure of foreign assets in Indian income tax returns.
Section 6 of the Income Tax Act: Residency Criteria for FY 2024–25
An individual is considered a resident in India if they satisfy any one of these two basic conditions:
1. Stayed in India for 182 days or more during the financial year, OR
2. Stayed in India for 60 days or more during the year and 365 days or more during the 4 preceding financial years.
Important Exceptions for Indian Citizens and Persons of Indian Origin (PIO)
1. The 60-day minimum becomes 182 days if you are an Indian citizen or PIO visiting India.
2. The 60-day rule changes to 120 days if:
– Your income in India exceeds ₹15 lakh, and
– You are an Indian citizen or PIO visiting India.
Deemed Residency Rule (Section 6(1A))
Introduced from FY 2020–21 onwards, this rule states:
– Indian citizens having total income over ₹15 lakh in a year in India and who are not liable to tax in any other country, will be deemed residents in India.
This rule targets individuals who do not pay tax abroad and have significant Indian income.
Practical Examples
| Example | Stay in India (days) | Indian Income | Other Factors | Residency Status |
| Working professional in US | 40 | < ₹15 lakh | Stayed 300 days last 4 years | NRI |
| Frequent visitor with high income | 130 | ₹20 lakh | Indian citizen | Resident (120-day rule) |
| NRI in UAE, no tax abroad | 100 | ₹18 lakh | Not liable to tax abroad | Deemed Resident |
| Returning NR | 200 | Overseas income ongoing | New resident | Resident |
Understanding RNOR: Resident but Not Ordinarily Resident
An individual qualifies as RNOR (Resident but Not Ordinarily Resident) if they were a non-resident in 9 out of the 10 previous years preceding the current year, or if their stay in India was more than 730 days during the 7 preceding previous years.
Tax Implications of Becoming a Resident
| Aspect | Resident and Ordinarily Resident (ROR) | Resident but Not Ordinarily Resident (RNOR) |
| Taxable Indian income | Yes | Yes |
| Taxable global income | Yes | No |
| Foreign asset disclosure required | Yes | No |
| Eligibility for DTAA relief | Yes | Yes |
| Appropriate ITR form | ITR-2 or ITR-3 | ITR-2 or ITR-3 |
For detailed information on which ITR form suits your status, check our ITR Filing Guide 2025.
Planning Your Tax Residency
1. Maintain accurate travel records with passport stamps.
2. Plan your stay in India to manage thresholds and avoid unintended residency.
3. If your Indian income exceeds ₹15 lakh, monitor the 120-day reduced threshold.
4. Utilize DTAA provisions to prevent double taxation—submit necessary proofs like TRC and Form 10F.
5. Consult tax experts if you anticipate residency status changes.
Explore our Income Tax Return Filing services tailored for NRIs and returning residents.
When Should You Consult a CA?
– If your days in India approach or exceed residency thresholds.
– You earn substantial income in India or abroad.
– You are unsure about RNOR status applicability.
– You need help with foreign asset disclosures or tax planning.
Our Regulatory Compliance Services offer expert support for NRIs facing these complexities.
FAQs
Q1: How many days can an NRI stay in India without becoming a tax resident?
A: Generally, fewer than 182 days in a financial year. For Indian citizens or PIOs with Indian income over ₹15 lakh, the limit reduces to 120 days.
Q2: What is the difference between RNOR and ROR status?
A: RNOR is a transitional resident status where global income is partially exempt for up to two years. ROR means full tax liability on global income.
Q3: What happens if I become a deemed resident under Section 6(1A)?
A: You are taxed on your global income in India if you have income over ₹15 lakh and are not taxable elsewhere.
Q4: Can I avoid being resident by limiting my stay in India?
A: Yes, staying fewer days than the prescribed thresholds can help maintain your NRI status.
Q5: How does residential status affect my tax filing?
A: It determines which ITR form you file and which income sources you must disclose and pay tax on.
Q6: Are NRIs required to disclose foreign assets in India?
A: Only if they are residents or ordinarily residents. NRIs generally do not need to disclose foreign assets.
Q7: What documents prove my residency status?
A: Passport entry and exit stamps, visa records, and travel logs are key. You may also need Tax Residency Certificates (TRCs) from your country of residence.
Determining when an Nom-Resident becomes a resident for tax purposes is vital for tax compliance and optimal planning. Given the evolving tax rules and stringent disclosure requirements, it is essential to monitor your stay and income carefully.
Whether you are a frequent visitor, high-earning NRI, or planning to return permanently, understanding your residential status helps you manage your tax obligations effectively and avoid penalties.
At PGA & Co.(PGACA), we specialize in helping NRIs and returning Indians navigate these complexities with expert advice and tailored services.
Contact our tax advisory team today for a comprehensive review and smooth compliance in FY 2024–25.