Are you an Indian living abroad and unsure whether you qualify as an NRI for tax purposes? Or perhaps you’ve recently returned to India and don’t know how your tax status will change? Understanding residential status under Section 6 of the Income Tax Act, 1961 is the single most critical factor determining your tax obligations in India.
At NRI Tax CA, we help NRIs and returning Indians navigate residential status determinations every year. This guide explains exactly how it works — in plain language.
Why Residential Status Matters for Tax
Your residential status determines what income India can tax:
- Resident and Ordinarily Resident (ROR): Global income is taxable in India
- Resident but Not Ordinarily Resident (RNOR): Only India-sourced income + business/profession income from outside controlled from India is taxable
- Non-Resident (NRI): Only income earned or received in India is taxable
Section 6 Explained: The Two Tests
Section 6 of the Income Tax Act sets out two conditions to determine whether a person is “resident” in India for a given financial year (April 1 to March 31).
Basic Condition (Section 6(1))
A person is resident in India if they satisfy either of these conditions:
- They are in India for 182 days or more during the financial year, OR
- They are in India for 60 days or more during the financial year AND for 365 days or more in the 4 preceding financial years combined.
Special exception: For Indian citizens who leave India for employment abroad (or as crew of an Indian ship), the 60-day threshold in condition 2 is replaced by 182 days. Similarly, for Indian citizens or Persons of Indian Origin (PIOs) visiting India, the threshold was extended — see the important amendment below.
2020 Amendment: 120-Day Rule for High-Income NRIs
The Finance Act 2020 amended Section 6 significantly. For Indian citizens or PIOs visiting India whose India-sourced income exceeds ₹15 lakh in a financial year, the 60-day threshold under condition 2 becomes 120 days (not 182 days).
This means high-income NRIs who spend 120+ days in India AND have 365+ days in the preceding 4 years will be treated as resident (though potentially RNOR — see below).
Deemed Resident Rule (Section 6(1A)) — Introduced in 2020
A new “deemed resident” category was introduced: an Indian citizen who is not taxable in any other country due to domicile, residence, or similar criteria, AND whose India income exceeds ₹15 lakh, will be deemed to be resident in India — even if they spend zero days here.
This was aimed at stateless individuals or those in zero-tax jurisdictions. If this applies to you, consult a CA immediately — the implications are significant.
Who Qualifies as NRI?
You are an NRI (Non-Resident Indian) for income tax purposes if you do NOT satisfy either of the basic conditions under Section 6(1). In practice, this means:
- You stayed in India for less than 182 days during the financial year (for most NRIs living abroad year-round), OR
- You stayed less than 60/120 days AND the 4-year look-back test is also not met.
Note: NRI status under the Income Tax Act is different from NRI status under FEMA (Foreign Exchange Management Act). The IT Act test applies purely for income tax purposes.
What Income Is Taxable for NRIs in India?
As an NRI, only the following income is taxable in India:
- Salary received or earned in India (e.g., for services rendered in India)
- Rental income from property located in India
- Capital gains from sale of assets in India (property, stocks, mutual funds)
- Interest on NRO (Non-Resident Ordinary) accounts
- Business income from operations in India
Not taxable in India for NRIs: NRE account interest, FCNR account interest, salary earned and received abroad, foreign capital gains.
Practical Day-Count: Common Scenarios
Scenario 1 — Classic NRI: Rahul lives in the USA. He visits India for 45 days in FY 2025-26. He is NRI. Only India income taxable.
Scenario 2 — Frequent Traveller: Priya visits India for 90 days every year. Over 4 years = 360 days. In FY 2025-26 she visits for 65 days. 65 > 60 AND 360 + 65 = 425 > 365. She becomes RESIDENT. If she just became resident, she may qualify as RNOR (see our RNOR guide).
Scenario 3 — High Income NRI visiting India: Amit has ₹20 lakh India income and visits for 125 days. Under the 120-day rule, 125 > 120. Combined with 4-year look-back, he may be resident — potentially subject to global income tax. Urgent CA consultation needed.
How to Count “Days in India”
Days are counted as calendar days of physical presence in India. Both the day of arrival AND the day of departure are counted as days in India. Flight timings matter — if you land at 11:59 PM, that day still counts.
Keep a record of all travel: passport stamps, boarding passes, immigration records. The Income Tax Department can verify day counts, and disputes are not uncommon.
Which Financial Year and Assessment Year?
Residential status is determined for each financial year separately (April 1 to March 31). The tax return for FY 2025-26 (Assessment Year 2026-27) must be filed by July 31, 2026, and your status for that year is determined by days spent in India between April 1, 2025 and March 31, 2026.
Documents You Need for Residential Status Determination
- Passport with all visa stamps and entry/exit records
- Work visa / employment contract for the country you live in
- Employer’s letter confirming overseas posting (if applicable)
- Bank statements showing NRE/NRO accounts
- Foreign tax returns or proof of tax residency abroad (if any)
Need Help Determining Your Residential Status?
An incorrect residential status determination can mean paying tax on global income when you shouldn’t — or missing required tax filings when you should. At NRI Tax CA, we review your day count, passport records, and income profile to give you a clear, CA-certified determination of your status.
Unsure about your NRI status for the current year? Use our NRI tax calculator — it accounts for residential status automatically. For ITR filing or status determination, consult our CA team.
📞 WhatsApp us at +91 89309 63079 or fill our contact form for a confidential consultation. We assist NRIs across USA, UAE, UK, Canada, Australia, Singapore, and more.
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