The basic residency tests
India’s tax residency rules (carried forward in substance from the 1961 Act’s Section 6 into
the Income-tax Act, 2025) treat an individual as resident in a financial year if they are in India for 182
days or more in that year, or for 60 days or more in that year and 365 days or more across the preceding four
years -- with the 60-day condition relaxed to 182 days for Indian citizens and persons of Indian origin
visiting India, and further specific relaxations for Indian citizens leaving India for employment abroad.
The Deemed Resident rule
Inserted by the Finance Act, 2020, the Deemed Resident provision treats an Indian citizen with total Indian
income exceeding ₹15 lakh in a financial year as resident in India if they are not liable to tax in any
other country or territory by reason of domicile, residence, or a similar criterion -- a rule specifically
targeting high-net-worth individuals structuring their affairs to avoid tax residency anywhere. Importantly, a
person deemed resident under this rule is automatically classified as RNOR rather than fully resident, which
limits India’s taxation of their foreign-source income. In practice this provision mainly affects Indian
citizens working in tax-free or low-tax jurisdictions such as the UAE or other Gulf states who earn or route
significant Indian-source income -- such individuals should track their Indian-source income against the
₹15 lakh threshold each year rather than assuming Gulf employment alone keeps them outside India’s
tax net.
RNOR status -- a valuable transitional classification
An individual qualifies as Resident but Not Ordinarily Resident (RNOR) if they have been non-resident in
India in 9 of the preceding 10 financial years, or have been in India for 729 days or fewer during the
preceding 7 financial years. RNOR status generally exempts foreign-source income from Indian taxation (except
business income controlled from India), making it a genuinely valuable transitional status for NRIs
returning to India, since it delays full taxation of foreign income for a limited window after their return.
Because the RNOR window is time-limited and depends on the exact date of return, NRIs planning a permanent
move back to India often benefit from timing large foreign-asset sales, retirement-account withdrawals, or
dividend receipts to fall within the RNOR years, and should get this planning done with a chartered accountant
before relocating rather than after residency status has already shifted.
If I spend exactly 100 days in India this year, am I automatically an Indian tax resident?
Not necessarily on that basis alone -- 100 days doesn’t meet the 182-day test by itself, so residency
would depend on whether the second test applies (60 days or more this year, combined with 365 days or more
across the preceding four years), and on which relaxations, if any, apply to your specific circumstances.
I'm a wealthy Indian citizen who isn't tax resident anywhere -- am I automatically taxed on my worldwide income in India?
Not automatically on worldwide income -- while the Deemed Resident rule would classify you as resident if
your Indian income exceeds ₹15 lakh and you aren’t tax resident elsewhere, you would be classified
as RNOR rather than fully resident, meaning your foreign-source income generally remains outside India’s
tax net except for business income controlled from India.
How long can a returning NRI benefit from RNOR status?
RNOR status is based on the specific day-count and prior-residency tests -- generally, a returning NRI can
retain RNOR status for a limited transitional period after their return (commonly up to a couple of years,
depending on their specific residency history), during which their foreign-source income remains largely
outside India’s tax net.
