The day-count tests, the deemed-resident rule, and what each status means for your foreign income
Residential status, not citizenship, decides how much of your income India taxes. You are resident if you are in India for 182 days or more in the year, or 60 days or more plus 365 days or more across the preceding four years (the 60-day limb relaxes to 182 days for an Indian citizen leaving for employment or a visiting NRI, but tightens to 120 days for a visiting Indian citizen or PIO whose Indian income exceeds Rs 15 lakh). A resident is then Ordinarily Resident (ROR), taxed on worldwide income, unless they were non-resident in 9 of the preceding 10 years or in India for 729 days or fewer over the preceding 7 years, which makes them Resident but Not Ordinarily Resident (RNOR), a 2-to-3-year cushion where foreign income largely stays untaxed. An NRI is taxed on Indian-source income only.
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Are you resident? The day-count tests
You are resident in India for a tax year if either: you are in India for 182 days or more in that year; or you are in India for 60 days or more in that year and 365 days or more across the four preceding years. The 60-day limb is relaxed to 182 days for an Indian citizen leaving India for employment (or as crew of an Indian ship) and for an Indian citizen or person of Indian origin visiting India. But the Finance Act 2020 carve-out tightens that: a visiting Indian citizen or PIO whose Indian-source (non-foreign) income exceeds Rs 15 lakh becomes resident at 120 days (and is treated as RNOR, not ROR). Count days from your passport and travel record.
Ordinarily Resident vs RNOR (the returning-NRI cushion)
Once you are resident, you are Ordinarily Resident (ROR) and taxed on your worldwide income, unless you qualify as RNOR. You are RNOR if either you were a non-resident in India in 9 of the 10 preceding years, or you were in India for 729 days or fewer over the 7 preceding years. A returning NRI typically meets one of these for the first 2 to 3 years back, so RNOR is a transition cushion: during it, your foreign-source income (foreign interest, dividends, gains) generally stays outside Indian tax, and only Indian-source income and income from a business controlled from India is taxed. Plan major foreign-income events into this window.
tipJust back in India after years abroad? You are likely RNOR for 2 to 3 years, your foreign income stays untaxed here during that window. Time foreign share sales and pension withdrawals into it where you can.
The deemed-resident rule, and scope by status
A further rule (Section 6(1A)) catches the high-earning Indian citizen taxed nowhere: an Indian citizen with Indian-source income over Rs 15 lakh who is not liable to tax in any other country by reason of domicile or residence is deemed resident and treated as RNOR, statelessness is not a tax shelter. The scope of tax then follows status: an ROR is taxed on global income; an RNOR on Indian-source income plus income from a business or profession controlled from India (foreign passive income excluded); and an NRI on Indian-source income only. Note FEMA (exchange-control) residence is a separate test from this income-tax residence, and the two can diverge on return.
By days in India, not citizenship. You are resident if you are here 182 days or more in the year, or 60 days or more plus 365 over the preceding four years. The 60-day limb relaxes to 182 days if you left for employment or are an NRI visiting, but tightens to 120 days for a visiting citizen or PIO whose Indian income exceeds Rs 15 lakh. If you are not resident, you are an NRI.
What is RNOR and why does it matter?+
Resident but Not Ordinarily Resident, a transitional status. You are RNOR if you were non-resident in 9 of the preceding 10 years, or in India 729 days or fewer over the preceding 7 years, which a returning NRI usually meets for 2 to 3 years. During RNOR your foreign-source income generally stays untaxed in India, only Indian income and income from a business controlled from India is taxed. It is a valuable planning window.
Can I be taxed as resident even if I live abroad?+
Possibly, under the deemed-resident rule. An Indian citizen with Indian-source income over Rs 15 lakh who is not liable to tax in any other country (by domicile or residence) is deemed resident and treated as RNOR under Section 6(1A). It targets high-earning citizens who arrange to be taxed nowhere, statelessness does not avoid Indian tax. Most people genuinely tax-resident in another country are not caught.
Does residential status change what income India taxes?+
Yes, entirely. A Resident and Ordinarily Resident is taxed on worldwide income. An RNOR is taxed on Indian-source income plus income from a business or profession controlled from India, with foreign passive income excluded. An NRI is taxed only on Indian-source income. So establishing your status correctly each year is the first step in any cross-border tax position.