Published on: March 27, 2025 | Article No: 319 | By: @rprasanth_kumar
When it comes to income tax status, the difference between a Non-Resident Indian (NRI) and a Resident Indian is more than just geography—it’s about days spent in India, income sources and DTAAs. Let’s break it down in a simple way.
Who is a NRI?
A Non-Resident Indian (NRI) is an individual who does not qualify as a Resident Indian for tax purposes. The key here is the number of days spent in India. According to Section 6 of the Income Tax Act, 1961, a person is considered a Resident if they meet either of these 2 conditions:
✅ Spent 182 days or more in India in the previous year, OR
✅ Spent 60 days or more in India in the previous year AND 365 days or more in the four years preceding it.
If neither condition is met, the person is classified as an NRI for that year.
Key laws governing NRI status in India: Two major laws define the rights, responsibilities, and financial regulations for NRIs:
- Income Tax Act: Determines how NRIs are taxed on their income earned in India. More info in indiacode.nic.in
- Foreign Exchange Management Act (FEMA): Regulates NRIs’ financial transactions, investments, and the opening/operation of bank accounts in India. More info in indiacode.nic.in
Exceptions for Indian Citizens and Persons of Indian Origin (PIOs)
For Indian citizens and PIOs visiting India, the 60-day rule is extended to 182 days, meaning they can stay in India longer without becoming tax residents. Similarly, Indian citizens leaving the country for employment or as crew members also enjoy this 182-day rule.
However, post-2020 amendments, if an Indian citizen or PIO earns more than ₹15 lakh (excluding foreign income) in a financial year, the 60-day period is adjusted to 120 days instead of 182. This means high-income NRIs may attain Indian tax residency sooner. More details and an example in the next section.
Deemed Tax Residency – Income above ₹15 Lakhs
If an Indian citizen earns over ₹15 lakh (excluding foreign income) and is not taxable in any other country, they are automatically deemed a Resident Indian for tax purposes. This rule prevents tax evasion by individuals claiming non-residency in all countries.
Will I Lose My NRI Status if My Indian Income Exceeds ₹15 Lakhs?
- Not necessarily. Your NRI status depends on the number of days you spend in India, not just your income.
- However, if your Indian income exceeds ₹15 lakh and you spend 120 days or more in India, you may be considered a Resident Indian for tax purposes.
- Additionally, if you are not liable to pay tax in any other country, you may be deemed a Resident Indian under the new rules.
- It’s important to monitor both your stay in India and your global tax liability to avoid unexpected tax residency changes.
For example: I am a salaried employee in France and pay my income taxes in France. Even if I start earning above ₹15 lakhs in India, I will still be a NRI and not a resident Indian because I am a Tax Resident in France. This is as per the Indo-French Double Taxation Avoidance Agreement. In addition to my French Income Tax declaration every year, I submit ITR-2 every year in India.
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How is a NRI Taxed in India?
NRIs are taxed only on income linked to India. Here’s how it works:
| Nature of Income | Taxability for NRIs |
|---|---|
| Income accruing or arising in India | Taxed |
| Income deemed to accrue in India | Taxed |
| Income received in India | Taxed |
| Income deemed to be received in India | Taxed |
| Income accruing outside India from a business controlled from India or from a profession set up in India | Not taxed |
| Any foreign income with no Indian connection | Not taxed |
Income Tax Declaration (ITR) Forms for NRIs
✅ ITR-1: Not applicable for Non-Resident Individuals.
✅ ITR-2: Applicable for Non-Resident Individuals if not having income under the head Profits and Gains of Business or Profession.
✅ ITR-3: Applicable for Non-Resident Individuals if having income under the head Profits and Gains of Business or Profession.
More details about taxation of Non-Resident Individuals can be found from Incometax.gov.in
DISCLAIMER
Any finance-related information shared is not professional legal, tax, or investment advice. The information provided is of an educational and general nature and is not investment advice within the meaning of Articles L. 321-1 and D. 321-1 of the French Monetary and Financial Code. Investment carries risks of loss and past performance does not guarantee future performance. Please consult a financial advisor for any professional advice.