Your Indian tax liability depends entirely on residential status, and a single day can change it. Here is how status is determined for 2026-27, what India taxes, and how to claim treaty relief.
Your passport does not decide your Indian tax position. Your visa does not either. Days do.
Indian tax law tests where you were physically present, for how long, and in which year. Cross a threshold by a single day and the answer changes from "India taxes only my Indian income" to something far broader. Get it wrong and you either overpay or receive a notice.
From 1 April 2026, this is governed by Section 6 of the Income-tax Act, 2025. The good news is that the core tests were carried over unchanged from the 1961 Act, so the planning you have been doing still works. The section numbers moved, not the rules.
This guide covers how status is determined, what India taxes in each category, how to claim treaty relief, and what you must file.
Everything follows from which of these you fall into for a given year.
The gap between RNOR and ROR is the one that matters most in rupees, and it is the one returning NRIs most often mishandle.
Status is tested separately for every financial year, running 1 April to 31 March. Last year's answer tells you nothing about this year's.
You are a resident if either applies:
Test A. You were in India for 182 days or more in the tax year.
Test B. You were in India for 60 days or more in the tax year and 365 days or more across the four preceding tax years.
Fail both, and you are a non-resident.
Test B is relaxed in two situations, and this is where most NRIs actually sit.
Indian citizens leaving for employment abroad, and crew members of Indian ships. The 60 days in Test B is replaced with 182 days. So only the 182-day test effectively applies to you in your year of departure.
Indian citizens and persons of Indian origin visiting India. The 60 days becomes 182 days where your Indian-source income is ₹15 lakh or less.
Here is the trap. If you are an Indian citizen or PIO visiting India and your total income excluding foreign-source income exceeds ₹15 lakh, the threshold in Test B drops to 120 days.
So: 120 days or more in India, plus 365 days or more across the preceding four years, plus Indian income above ₹15 lakh, and you become a resident. Below 182 days in that situation you are classified RNOR, not ROR, which keeps most foreign income outside the net.
A separate rule catches Indian citizens who pay tax nowhere. You are deemed resident if all three apply: you are an Indian citizen, your total income excluding foreign-source income exceeds ₹15 lakh, and you are not liable to tax in any other country by reason of domicile, residence or similar criteria.
This applies regardless of how many days you spent in India, including zero.
It matters most in the Gulf. An Indian citizen in the UAE, Saudi Arabia, Bahrain, Kuwait, Oman or Qatar earning more than ₹15 lakh from Indian sources is generally not liable to tax locally, and can therefore be caught. The relief is that a deemed resident is classified RNOR, so foreign income stays largely outside the Indian net.
Note also that this rule applies to Indian citizens, not to OCI card holders or foreign-citizen PIOs.
Once you are a resident, you are RNOR if any one of these applies:
For a returning NRI, RNOR typically lasts two to three financial years, and it is the single best planning window you will get. Crystallise foreign capital gains, restructure foreign holdings, and deal with foreign retirement accruals while it lasts. Our detailed guide on taxation for a resident but not ordinarily resident covers the mechanics, and residential status and its impact on taxability works through the day counts.
That last row is the exception people miss. RNOR does not shelter foreign income from a business you control from India or a profession you set up here.
The wider position on when foreign income becomes taxable is in our guide to tax on foreign source income of a resident Indian.
Three account types, three outcomes, and this is the simplest planning lever available.
NRE, rupee account funded from abroad. Interest exempt while you are non-resident. Fully repatriable. Convert or re-designate on return, because the exemption goes with your status.
FCNR, foreign currency deposit. Interest exempt while non-resident. Protects you from rupee movement.
NRO, for Indian-source income like rent and dividends. Interest fully taxable at slab rates, with TDS deducted. Repatriation is subject to limits and certification.
The practical rule: route Indian income through NRO, keep overseas earnings in NRE or FCNR, and review the position the moment your status changes.
The new regime is the default, with the option to elect out.
Two points specific to non-residents. The Section 87A rebate is not available to you, so the nil band is a slab, not an exemption from tax on higher income. And the basic exemption is not available against certain income taxed at special rates, including many capital gains.
Confirm the current year's slabs and any surcharge before computing, since these have moved in successive Finance Acts.
India has treaties with more than 90 countries, and under them you can often pay less than the domestic rate on Indian income, particularly interest, dividends and royalties.
To claim it you need a Tax Residency Certificate from your country of residence covering the relevant year, and the prescribed declaration.
Important change: from 1 April 2026, Form 41 under Rule 75 of the Income-tax Rules, 2026 replaces the old Form 10F. It must be filed electronically for each year in which you claim treaty benefit, supported by a valid TRC. Without both, the payer will deduct at the full domestic rate, and the form cannot be filed retrospectively to recover tax already deducted.
Where tax has been withheld abroad on income also taxable in India, credit is claimed through Form 67, covered in our guide on when and how to file Form 67 for foreign tax credits.
Non-residents face withholding at higher rates than residents, and it is deducted before you see the money.
Common situations: rent paid to you, interest on NRO deposits, dividends from Indian companies, and above all sale of Indian property, where the buyer must deduct on the sale consideration rather than on your gain.
That last one traps almost every NRI seller. The remedy is a lower deduction certificate, applied for before the transaction, so tax is withheld on the actual gain. Our note on the challenges NRIs face when selling property in India covers the process and the repatriation side.
You must file where your Indian income exceeds the basic exemption, where you want a refund of excess TDS, or where you need to carry forward losses.
Use ITR-2, or ITR-3 if you have business income. ITR-1 and ITR-4 are not available to non-residents. The schedules that matter are FSI for foreign-source income, TR for treaty relief, and FA for foreign assets.
Which form applies in which situation is set out in our guide on which ITR form NRIs should use.
This catches returning NRIs badly.
Non-residents and RNORs are not required to disclose foreign assets in Schedule FA. From your first ROR year, disclosure becomes mandatory, and it covers foreign bank accounts including dormant and closed ones, brokerage accounts, vested shares and RSUs, insurance with cash value, property and trusts.
The penalty for non-disclosure under the Black Money Act can reach ₹10 lakh per year even where no tax was lost, which is wildly disproportionate to the omission. See what happens if you do not disclose foreign income in your ITR, black money and non-residents and, if a notice has already arrived, how to handle disputes under the Black Money Act.
A point that costs people real money: your residential status under FEMA is not the same as under income tax.
FEMA looks at intention and purpose of stay, not day counts. So you can be a non-resident for tax and a resident under FEMA, or the reverse. That divergence governs what accounts you may hold, what property you may buy, and how you repatriate.
Our guide to benefits to NRIs under FEMA and the Income Tax Act sets out where the two definitions part company.
DSRV and Co LLP advises NRIs, returning Indians and their families on residential status determination, RNOR planning, treaty relief and TRC documentation, property sales and lower deduction certificates, foreign asset disclosure, and the parallel FEMA position. We have been in practice from Gurugram since 1987.
Where a notice or reassessment follows, we handle it through to appeal as part of our tax litigation practice.
Up to 181 days is safe on the primary test. But if your Indian income exceeds ₹15 lakh and you have 365 days or more across the preceding four years, 120 days is enough to change your status.
No. Non-residents are taxed only on Indian income. Foreign income becomes taxable when you become ROR.
Resident but not ordinarily resident, a transitional status where foreign income is largely outside the Indian net. Typically two to three financial years after returning.
Yes, if you are an Indian citizen, your Indian income exceeds ₹15 lakh, and you are not liable to tax in any other country. You would be classified RNOR.
Not while you are non-resident. It becomes taxable once you are resident, so re-designate accounts on return.
No. From 1 April 2026, Form 41 under Rule 75 of the Income-tax Rules, 2026 replaces it, and must be filed electronically each year with a valid TRC.
No. The rebate is not available to non-residents.
ITR-2, or ITR-3 where there is business income. ITR-1 and ITR-4 are unavailable.
Send us your travel dates and your Indian income, and we will tell you which status you are heading for, what it will cost, and what to change while there is still time.
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