The Question That Comes Up Every March

Every year, around the time advance tax deadlines pass and ITR season begins, a version of this conversation happens across CA offices: "I was abroad for most of the year — I'm an NRI, right?"

Not necessarily.

Your tax residency in India is not decided by your visa status, your passport, your job contract abroad, or where your salary lands. It is decided by a specific count of days spent in India during the financial year — and in some cases, over the preceding four years. Getting this wrong has real consequences: the difference between an NRI and a resident is the difference between global income being taxable in India and only Indian-sourced income being taxable.

The Law Has Two Tests — Both Matter

Under the Income Tax Act, 2025 (which governs from FY 2026–27 onwards, replacing the Income Tax Act, 1961), an individual is treated as a Resident if they satisfy either of the following:

Test 1 — The 182-Day Rule: You are in India for 182 days or more during the financial year (1 April to 31 March).

Test 2 — The 60-Day Rule: You are in India for 60 days or more during the financial year and 365 days or more in aggregate during the four preceding financial years.

If you satisfy neither test, you are a Non-Resident Indian (NRI) for that year. Simple enough — until the exceptions arrive.

When 182 Days Is Not the Threshold

Here is where most people trip up. For certain categories of individuals, Test 2 is modified. The 60-day threshold is replaced with 182 days, which effectively means Test 2 becomes nearly impossible to satisfy. This applies to:

• Indian citizens leaving India for employment abroad — which covers most IT professionals, bankers, and salaried expats who moved out during the year
• Indian citizens or Persons of Indian Origin (PIOs) who visit India — meaning, someone who is already settled abroad and comes back for a holiday or family matter
• Members of the crew of an Indian ship

For these individuals, only Test 1 applies in practice. If you are in India for fewer than 182 days during the year, you are an NRI — regardless of how many days you were here in the previous four years.

What this means for you: If you relocated to the US for a job in August last year, and you were in India for around 120 days in the financial year, you are an NRI for that year. Your Indian salary prior to relocation is taxable in India; your US income is not.

The Trap: Deemed Residency

The provision most people have never heard of — and which quietly applies to high-income Indians — is the deemed residency rule.

If an Indian citizen is not a resident in India under either test above but has total Indian income exceeding ₹15 lakh in the financial year and is not liable to tax in any other country, they are deemed to be a resident in India for that year. This was introduced specifically to address a situation where individuals structured their affairs to be tax residents of no country.

What this means: If you are an Indian citizen living in, say, the UAE or Bahrain (which have no personal income tax), and your Indian-sourced income — rental income, interest, capital gains — exceeds ₹15 lakh in the year, you cannot assume NRI status shields you entirely. You will be treated as a resident for Indian tax purposes for that year.

This does not apply if you are a tax resident elsewhere. A person filing returns and paying taxes in the US, UK, or Singapore is not caught by this rule.

One More Layer: Resident But Not Ordinarily Resident

If you clear the residency test but have spent limited time in India over the past several years, you may qualify as an RNOR — Resident but Not Ordinarily Resident. This is a transitional status that limits your Indian tax liability significantly, and it deserves its own article. (It is coming.)

Count Your Days Before Someone Else Does

The day-count is not approximate. Every day you are in India — including the day of arrival and the day of departure — counts. Missed a flight? Extended a trip for a wedding? Had a medical emergency? Each of those days adds up.

If you are near the 182-day boundary, do not guess. Pull your travel records, cross-check your passport stamps, and count. The Income Tax Department has access to immigration data. They will count if you do not.

Your residency status determines the entire scope of your Indian tax obligation for the year. Establish it correctly before you file — not after a notice arrives.

CA Praneeth Thunuguntla | Thunuguntla & Associates | Income Tax & GST Advisory