NRI Taxation Guide for Australia -- Residential Status, DTAA & Filing

How Indian residential status is decided -- the day-count rules

Per the Income Tax Department's own guidance, an individual is a Resident of India in a tax year if they meet either of two tests: (a) present in India for 182 days or more in that year, or (b) present for 60 days or more in that year AND 365 days or more across the preceding four years. Anyone who fails both tests is a Non-Resident (NRI) for that year.

Special relaxations that matter for people based in Australia

• Indian citizens leaving India for employment abroad are tested only against the 182-day rule for that year -- the 60-day alternative does not apply to them.
• Indian citizens/PIOs visiting India (based abroad, visiting) are also generally tested against 182 days, EXCEPT that a 120-day rule applies instead of 60 days if the person's total Indian-sourced income exceeds ₹15 lakh in that year.
• Deemed Resident: an Indian citizen with more than ₹15 lakh of Indian-sourced income who is not liable to tax in ANY other country or territory is deemed an Indian resident regardless of days spent in India -- a provision aimed at closing a “stateless for tax purposes” gap, not something that affects genuine Australian tax residents.

Australia's own residency tests -- more than one way to qualify

Separately from India's rules, the Australian Taxation Office applies up to four tests to decide Australian tax residency: the resides test (the ordinary meaning of residing in Australia), the domicile test (Australian domicile plus a permanent place of abode in Australia), the 183-day test (present in Australia for 183 days or more in the income year, subject to exceptions), and the Commonwealth superannuation fund test for certain government employees. Satisfying any one test is generally enough to be treated as an Australian tax resident. It is entirely possible for someone to be non-resident in India under Indian rules while still being an Australian tax resident under these tests, or vice versa -- the two countries' tests are applied independently.

Resident but Not Ordinarily Resident (RNOR)

Even if the day-count tests make someone an Indian Resident, they may still qualify as “Not Ordinarily Resident” (a lighter tax status, closer to NRI treatment for foreign income) if they were a non-resident in 9 of the preceding 10 years, or were present in India for 729 days or less over the preceding seven years. This commonly applies to NRIs returning to India after many years in Australia.

The India-Australia DTAA -- avoiding being taxed twice on the same income

India and Australia have a bilateral Double Taxation Avoidance Agreement. Where the same income (for example, Indian rental income that may also be reportable in Australia, since Australia taxes residents on worldwide income) could otherwise be taxed in both countries, the DTAA lets the taxpayer claim a foreign tax credit in one country for tax already paid in the other, under the article of the treaty that applies to that specific income type. To claim DTAA relief in India, an NRI typically needs a Certificate of Residency from the ATO and to file Form 10F.

Filing an Indian tax return as an NRI

An NRI must file an Indian Income Tax Return if their total Indian income exceeds the basic exemption limit, or in certain other specified situations. NRIs typically use ITR-2 or ITR-3 depending on the nature of their Indian income, and should check the current assessment year's exemption limit and filing rules before filing, since these are revised periodically.