Residential Status in India: A Simple & Clear Guide to Determine Your Tax Residency (2025)

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Determining your residential status in India is important because it decides how much of your income is taxed in India. According to the latest rules under the Income Tax Act, 1961, Your residential status is based on how many days you stay in India during a financial year (1st April to 31st March) and the years before that. Let us break it down in a simple way.

1. Who is a Resident in India?

An individual is considered a resident of India if they satisfy any one of these conditions:

• Condition 1 : Stay in India for 182 days or more in the financial year (from April 1 – March 31).

• Condition 2 : Stay in India for 60 days or more in the financial year, and a total of 365 days or more in the last four financial years.

Exceptions (Special Cases):

Exceptions (Special Cases):

• Indian Citizen Leaving India for a Job abroad

• The "60 days" condition (Point 2 above) is relaxed to 182 days in the year of departure.

• This means they will not be treated as a resident unless they stay in India for 182 days or more .

• Indian Citizen or Person of Indian Origin (PIO) Visiting India:

• Condition No 2 (above) ie 60 days not applicable in this case

• Normally, they must stay 182 days or more (instead of 60 days) in a year to be considered a resident.

• However, if their Indian income (excluding foreign income) is more than Rs. 15 lakh , then the threshold is reduced to 120 days instead of 182 days.

Simple Summary:

Simple Summary:

• If you stay in India for 182+ days , you are Resident .

• If you stay for 60+ days in a year AND 365+ days in the last 4 years , you are Resident .

• If you are leaving for a job abroad , you need 182+ days in India to be a Resident.

• If you are an NRI visiting India , you need 182+ days , or 120+ days if your Indian income is over ₹15 lakh , to be a Resident.

2. Who is RNOR (Resident but Not Ordinarily Resident)?

Once an individual qualifies as a Resident , the next step is to check whether he is:

• Resident and Ordinarily Resident (ROR), or

• Resident but Not Ordinarily Resident (RNOR)

A Resident individual is classified as a Resident but Not Ordinarily Resident (RNOR) if any one of the following conditions is satisfied:

• Non-resident in India for at least 9 out of the 10 immediately preceding previous years.

• Stayed in India for 729 days or less during the 7 immediately preceding previous years.

• An Indian citizen or a person of Indian origin whose total income (excluding foreign income) exceeds ₹15 lakhs during the previous year, and who has stayed in India for 120 days or more but less than 182 days during that previous year.

• An Indian citizen who is deemed to be a resident under Sec. 6(1A) of the Income Tax Act (i.e., not liable to tax in any other country and total income (excluding foreign income) exceeds ₹15 lakhs),

3. Who is a Deemed Resident?

3. Who is a Deemed Resident?

A Deemed Resident of India is an individual who is considered a tax resident under the Income Tax Act, 1961, even if they do not meet the standard residency criteria. This concept was introduced in the Finance Act, 2020 and is primarily aimed at preventing tax avoidance by individuals who are Indian citizens but do not qualify as residents in any country.

As per Section 6(1A) of the Income Tax Act:

• An Indian citizen shall be considered a Deemed Resident of India if:

• Their total income (excluding foreign income) exceeds ₹15 lakh in a financial year, and

• They are not liable to tax in any other country due to their domicile, residence, or similar criteria.

The above rule of determining a person as a 'deemed resident' of India will only be applicable where the normal rule of residency (based on physical presence in India during the relevant financial year and/or past four tax years) is not applicable . This means if an individual already qualifies as a Resident or RNOR under the regular conditions, the ‘Deemed Resident’ provision will not apply .

Implications of Being a Deemed Resident

Implications of Being a Deemed Resident

• Taxability:

Taxability:

• A deemed resident is considered Resident but Not Ordinarily Resident (RNOR) in India.

• Their global income is NOT taxable in India.

• Only income earned in India (or received/accrued in India) is taxable .

• Foreign Income & Double Taxation:

Foreign Income & Double Taxation:

• Income from foreign sources (outside India) is not taxed in India unless it is derived from an Indian business or profession.

• Filing of Tax Return:

Filing of Tax Return:

• A deemed resident must file an Income Tax Return (ITR) in India if their taxable income exceeds the basic exemption limit.

Example Scenario

Example Scenario

• An Indian citizen working in the UAE, where there is no income tax , and earning ₹20 lakh from an Indian business or rental income.

• Since the UAE does not impose a tax, he qualifies as a Deemed Resident in India.

• His Indian income (₹20 lakh) will be taxed in India .

"Still unsure about how deemed residency affects your tax liability? Read our detailed article: Understanding Taxation for Deemed Residents in India ."

4. Who is a Non-Resident (NRI)?

4. Who is a Non-Resident (NRI)?

An individual is considered a non-resident if they do not satisfy any of the conditions mentioned above for being a resident or RNOR.

Implications of Residential Status

Implications of Residential Status

• Resident : Subject to tax on global income in India.

• RNOR : Subject to tax on income received or deemed to be received in India, and income accruing or arising or deemed to accrue or arise in India.

• Non-Resident : Subject to tax only on income received or deemed to be received in India, and income accruing or arising or deemed to accrue or arise in India.

FAQ: Determination of Residential Status in India

1. What is residential status under the Income Tax Act, 1961?

Residential status determines how your income is taxed in India. It depends on your stay in India during a financial year and the past years. The three categories are:

• Resident (ROR) - Taxed on global income (India + abroad).

• Resident but Not Ordinarily Resident (RNOR) – Taxed only on Indian income and certain foreign income.

• Deemed Resident – Taxed on Income earned in India or controlled from India

• Non-Resident (NRI) - Taxed only on income earned or received in India.

2. Who is an NRI under Indian tax laws?

2. Who is an NRI under Indian tax laws?

An individual is an NRI (Non-Resident Indian) if they do not meet the criteria for being a Resident. NRIs are taxed only on income earned or received in India, while foreign income is not taxable in India.

3. What is RNOR status under Indian tax law?

RNOR stands for Resident but Not Ordinarily Resident . It is a special residential classification under the Income Tax Act, applicable to individuals who qualify as Residents but meet certain conditions that limit their taxation on foreign income.

4. Who can be classified as RNOR?

4. Who can be classified as RNOR?

An individual will be treated as RNOR if any one of the following conditions is satisfied:

• Was non-resident in 9 out of the 10 immediately preceding years, or

• Stayed in India for 729 days or less in the 7 preceding years, or

• Is an Indian Citizen/PIO with income > ₹15 lakhs (excluding foreign income) and stay in India during the previous year is 120 days or more but less than 182 days , or

• Is a Deemed Resident u/s 6(1A) (i.e., Indian citizen, not liable to tax elsewhere, and income > ₹15 lakhs).

5. Why is RNOR status important?

5. Why is RNOR status important?

5. Why is RNOR status important?

RNOR individuals enjoy tax relief in India. Their foreign income is not taxable in India unless:

• It is received in India, or

It is received in India, or

• It accrues or arises from a business controlled or a profession set up in India.

6. How is RNOR status different from ROR (Resident and Ordinarily Resident)?

• RORs are taxed on global income in India.

• RNORs are taxed only on Indian income and foreign income received in India or from Indian business/profession. This makes RNOR a tax-friendly category for returning NRIs or globally mobile professionals.

RNORs are taxed only on Indian income and foreign income received in India or from Indian business/profession.

This makes RNOR a tax-friendly category for returning NRIs or globally mobile professionals.

7. How long can someone remain RNOR?

7. How long can someone remain RNOR?

There is no fixed number of years, but practically, RNOR status can last up to 2–3 years after returning to India, depending on your past non-resident years and stay in India. After that, you typically become ROR and global income becomes taxable.

8. Can salary or investment income earned abroad be taxed in India if I am RNOR?

No, if you are RNOR and your salary or investment income is earned and received abroad, it is not taxable in India (unless it is from a business/profession controlled from India).

9. Do RNORs need to report foreign assets in Schedule FA of ITR?

No, RNORs are not required to report foreign assets or income in Schedule FA, which is mandatory only for RORs.

10. Do NRIs need to pay tax on foreign income?

No, NRIs are taxed only on income earned in India. Foreign income is not taxed in India unless the business is controlled from India.

11. How do I check my tax residency status for India?

You can check your status based on your days of stay in India using:

• Income Tax Act rules (182/60-day rule).

• Past travel records.

• Income sources in India and abroad.

12. What documents help in determining residential status?

To determine your residential status under Indian tax laws, you must maintain and provide specific documents that serve as proof of your stay in India, foreign earnings, and nature of income. These documents help in assessing whether you qualify as a Resident, RNOR, or NRI under the Income Tax Act, 1961.

Passport (entry/exit stamps): Your passport provides an official record of your travel history, which is used to calculate the number of days you were physically present in India during a financial year. The Immigration Stamps on your passport help determine The exact date of arrival and departure from India, The total number of days spent in India during the financial year, Whether you satisfy the 182-day rule or the 60-day & 365-day rule. Keep scanned copies of your passport pages showing travel history for future reference.

Visa Details: Why it’s important? Your visa type determines whether your stay in India is due to Employment (e.g., work visa), Business or investments (e.g., business visa, investor visa), Study purposes (e.g., student visa), Tourism or short visits (e.g., tourist visa)

13. Can an NRI become a Resident again?

Yes! If an NRI stays in India for 182+ days in a financial year, they will become a Resident under tax laws. If their stay is 120+ days & Indian income is ₹15+ lakh, they will be RNOR or Deemed Resident.

14. Can I reduce my tax liability by changing my residential status?

Yes, proper tax planning can help! If you stay fewer days in India, you can remain an NRI and avoid tax on foreign income. Consult a tax expert to optimize your tax planning.

Need Help in Determining Your Residential Status?

Need Help in Determining Your Residential Status?

Understanding your residential status is critical. Mistakes in this classification can lead to improper tax filings or notices from the Income Tax Department.

If you need personalised help in evaluating your residential status or for ITR filing, reach out to Contact CA Prakasha, Chartered Accountant and NRI Consultant in Bangalore , prakasha@balakrishnaandco.com for a paid consultation.

out to

prakasha@balakrishnaandco.com

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