Expat Tax Residency in India

India's tax-residency framework, governed by Section 6 of the Income Tax Act 1961 (mirrored in Section 6 of the Income Tax Act 2025 effective 1 April 2026), assigns every individual to one of three status categories for each financial year (1 April to 31 March): Resident and Ordinarily Resident (ROR), Resident but Not Ordinarily Resident (RNOR), or Non-Resident (NR). The status determines the scope of income subject to Indian tax and is determined independently each year. The Central Board of Direct Taxes (CBDT) administers the framework under the Income Tax Department.

How does India determine whether an individual is a tax resident?

Under Section 6(1) of the Income Tax Act 1961, an individual is a resident if either of two conditions is met during the relevant financial year:

• The 182-day rule: physical presence in India for 182 days or more in the financial year.
• The 60-day rule: physical presence in India for 60 days or more in the financial year AND aggregate presence of 365 days or more across the four immediately preceding financial years.

If neither condition is satisfied, the individual is classified as a Non-Resident (NR) for that year. Both counts include the day of arrival and the day of departure in India.

Two categories of individuals receive a relaxed threshold under the 60-day test:

1. Indian citizens and Persons of Indian Origin (PIOs) visiting India whose total Indian-source income does not exceed INR 15 lakh: the 60-day threshold extends to 182 days, effectively requiring only the primary 182-day test to apply.
2. Indian citizens who leave India during the year for employment abroad or as crew members of Indian ships: the 60-day threshold also extends to 182 days for that year.

The Income Tax Department's guidance for Assessment Year 2026-27 confirms that the RNOR criteria and residency thresholds are carried forward unchanged into the Income Tax Act 2025 (Section 6(13) of the 2025 Act corresponds to Section 6(6) of the 1961 Act).

What is the 120-day rule and who does it affect?

The Finance Act 2020 (effective from Financial Year 2020-21) introduced a modified threshold for a specific subset of individuals: Indian citizens or Persons of Indian Origin whose total Indian-source income exceeds INR 15 lakh in the financial year (excluding income from foreign sources).

For these higher-income individuals, the relaxed 60-day threshold described above is tightened from 182 days to 120 days. This means they qualify as resident if:

• Present in India for 120 days or more in the current financial year, AND
• Present in India for 365 days or more across the preceding four financial years.

Individuals who meet this 120-day test are classified as RNOR (not full ROR resident), so their foreign income remains generally exempt from Indian tax. PwC's India residence commentary (May 2026) confirms this threshold and its RNOR outcome.

The practical effect: a high-income Indian-origin professional based in the UAE who visits India for 130 days in a financial year and has been in India 400 days over the prior four years will be classified RNOR, not NR. Their foreign salary remains outside Indian tax; their Indian rental income, dividends from Indian companies, and Indian bank interest are taxable.

What is RNOR status and how long does it last?

Resident but Not Ordinarily Resident (RNOR) status is a transitional classification under Section 6(6) of the Income Tax Act 1961 (Section 6(13) in the 2025 Act). An individual who qualifies as resident under Section 6(1) is classified RNOR rather than ROR if they meet either of the following conditions:

• Nine-of-ten-year test: non-resident in India in 9 or more of the 10 financial years immediately preceding the current year.
• 729-day test: total physical presence in India of 729 days or fewer across the 7 financial years immediately preceding the current year.

RNOR status typically applies for the first two to three financial years after a long-term NRI returns to India, because they will satisfy the nine-of-ten or 729-day condition during those initial years. Once the individual has been resident for more than two of the preceding ten years and has accumulated more than 729 days in India over the preceding seven years, they graduate to full ROR status.

The income scope for RNOR is narrower than ROR:

• Taxable: income received or accruing in India from any source; income from a business or profession controlled or set up in India even if the income arises outside India.
• Generally exempt: income arising and received outside India that is not from a business controlled in India or a profession set up in India.

The India country overview provides broader context on the Indian tax framework.

What is the deemed-residency rule under Section 6(1A)?

The Finance Act 2020 inserted Section 6(1A) into the Income Tax Act 1961, effective from Financial Year 2020-21. The provision, retained as Section 6(7) in the Income Tax Act 2025, creates a deemed-residency category that applies regardless of physical presence.

An Indian citizen is treated as a deemed resident of India for a financial year if:

1. Their total income (other than income from foreign sources) exceeds INR 15 lakh in that year, AND
2. They are not liable to tax in any other country or territory by reason of domicile, residence, or any similar criterion.

The term liable to tax means a country has the legal right to impose income tax on the individual -- it is distinct from actually paying tax. A country that imposes no income tax at all (such as the UAE, Bahrain, or Bermuda) does not make an individual liable to tax there, so Indian citizens resident in such zero-tax jurisdictions who earn more than INR 15 lakh from Indian sources are captured by Section 6(1A).

Deemed residents are classified as RNOR (not full ROR), so foreign income remains generally exempt from Indian tax, but Indian-source income exceeding INR 15 lakh is fully within scope. Overseas Citizen of India (OCI) cardholders are explicitly excluded from the deemed-residency provision -- it applies only to Indian passport holders.

How do the three residency statuses differ in their scope of taxable income?

The table below summarises the income scope for each status, as confirmed by the Income Tax Department and PwC India:

For ROR individuals, all income received in India, accruing in India, or arising from an Indian business or profession is taxable, plus all foreign-source income regardless of where received. Foreign tax paid on doubly-taxed income may be credited against Indian liability under Sections 90, 90A, or 91 of the Income Tax Act, depending on whether a double-tax avoidance agreement (DTAA) exists. India has concluded comprehensive DTAAs with more than 90 countries; treaty tiebreaker tests resolve dual-residency conflicts where both countries claim the individual as a resident.

What compliance steps apply to Indian-resident expatriates?

Individuals classified as ROR or RNOR file the annual income tax return through the Income Tax Department's e-filing portal. The relevant form is typically ITR-2 (income from salary, house property, capital gains, and other sources) or ITR-3 (income from a business or profession). The due date for individuals not subject to tax audit is 31 July following the relevant financial year.

ROR individuals must complete Schedule FA (Foreign Assets) disclosing foreign bank accounts, foreign equity holdings, foreign immovable property, and foreign trusts. Failure to disclose attracts penalties under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act 2015. NRIs must quote their PAN (Permanent Account Number); absence of PAN triggers minimum 20% TDS under Section 206AA regardless of applicable treaty rates. NRE account interest is exempt under Section 10(4)(ii); FCNR deposit interest is exempt under Section 10(15); NRO account interest is taxable at 30% TDS under Section 195.

The residency determination must be revisited each financial year -- status is not automatically carried forward. Individuals whose circumstances place them near a threshold (for example, accumulating 150 to 180 days during a year) should seek guidance from a Chartered Accountant registered with the Institute of Chartered Accountants of India (ICAI) to assess their precise classification and Indian filing obligations, and should also review whether any applicable DTAA tiebreaker test affects their residency determination. See also the India country overview for related jurisdictional context.