NRI Income Tax India Residential Status: What Gets Taxed

For income tax, what matters is your residential status for the year, not your passport or your bank's NRI label. Status is decided by the number of days you spend in India. A non-resident pays Indian tax only on income received or arising in India. A resident and ordinarily resident person pays on income from anywhere in the world.

Why does residential status matter so much?

Because it decides how much of your income India can tax. The law sorts every individual into one of three groups: resident and ordinarily resident, resident but not ordinarily resident (RNOR), and non-resident. The same salary, rent or interest can be fully taxed, partly taxed or left alone depending on the group.

The word NRI is used loosely. Your bank calls you an NRI under the foreign exchange law, FEMA, which looks at why you went abroad. Income tax looks only at days in India. The two can differ in the year you leave or return.

The day-count tests

For FY 2025-26 and earlier years the same tests sit in section 6 of the Income-tax Act, 1961. The deemed resident rule there is section 6(1A), and the 120-day rule has applied since assessment year 2021-22. Years before 1 April 2026 stay under the 1961 Act.

How to work out your status

1. Count your days in India for the year from your passport stamps. Use 1 April to 31 March, not the calendar year.
2. If the count is 182 or more, you are a resident. Go to step 5.
3. If it is below 182, check whether you are covered by one of the relaxations for citizens and persons of Indian origin. If yes and your Indian income is Rs 15 lakh or less, you are a non-resident.
4. If the 60-day or 120-day test applies to you, add up your days in the four earlier years. 365 or more makes you a resident.
5. If you are a resident, check whether you are not ordinarily resident. You are RNOR if you were a non-resident in nine of the ten earlier years, or were in India for 729 days or less in the seven earlier years.

Two more people are RNOR by rule: the visitor caught by the 120-day test who stays under 182 days, and the deemed resident. The RNOR definition is in section 6(6) of the 1961 Act and section 6(13) of the 2025 Act.

Which income is taxed in India?

This scope rule is in section 5 of both Acts. In practice, Indian income for someone living abroad usually means rent from a house in India, interest on Indian deposits, gains on selling Indian shares or property, and salary for work done in India.

What about NRE account interest? It is exempt, but the exemption follows your status under FEMA, not your tax residency. Once you move back for good, ask your bank to redesignate the account.

Two worked examples

Leaving for a job. Rohan, an Indian citizen, leaves for a job in Germany on 1 July 2026. In tax year 2026-27 he is in India for 91 days: April, May and June. He left for employment, so only the 182-day test counts. He is a non-resident. His German salary is outside Indian tax. His rent of Rs 3,60,000 from a flat in Pune and his deposit interest of Rs 40,000 are taxed in India.

Long visits home. Priya, an Indian citizen settled in the US, spends 130 days in India in tax year 2026-27. Her Indian income from rent and capital gains is Rs 22,00,000. She was in India for about 100 days in each of the four earlier years, 400 in all. Because her Indian income is above Rs 15 lakh, the 120-day test applies, and she meets both parts of it. She is a resident, but RNOR. Her US salary stays outside Indian tax. Had her Indian income been Rs 12,00,000, she would have remained a non-resident.

The mistake people usually make

They decide status once and never check again. Status is a yearly fact. A long stay for a parent's illness, a sabbatical, or remote work from India can turn a non-resident into a resident for that year.

The second mistake is counting January to December. The third is treating the bank's NRI tag as the answer. The fourth is forgetting the Rs 15 lakh line: once your Indian income crosses it, a stay of 120 days can be enough.

Is the risk real? Yes. If you turn out to be resident and ordinarily resident, your foreign salary and foreign bank interest become taxable in India, and foreign assets must be reported in the return.

Filing the return as a non-resident

The e-filing portal lists ITR-2 for non-residents without business income and ITR-3 for those with it. ITR-4 is not open to non-residents or RNOR persons. The presumptive schemes for small businesses and professionals also need you to be resident. See which ITR form to file.

Slab rates are the same as for residents, and the new regime is the default. Under the old regime a non-resident gets the Rs 2,50,000 basic exemption whatever the age. Our note on old vs new tax regime explains the choice.

Tax is often deducted at source on Indian income paid to non-residents, and a tax treaty between India and your country of residence may lower the final bill. Both depend on your facts and paperwork, so take advice before you rely on them.

Do it yourself or take help?

If you clearly live abroad, visit for a few weeks and earn only rent or interest in India, you can work out your status with the steps above. Take help in the year you leave or return, when your stay crosses 120 days, or when you sell property or shares in India.

Frequently asked questions

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