NRIs often ask what's new in India's tax residency rules for 2026, but the headline provisions are not new at all. The 120-day stay test and the Section 6(1A) deemed-residency rule for Indian citizens earning ₹15 lakh or more from Indian sources have applied since FY 2020-21 (Assessment Year 2021-22), introduced by the Finance Act, 2020. Indians earning above this limit in tax-free jurisdictions are deemed tax residents of India even with zero days spent in India, but they're classified as Resident but Not Ordinarily Resident (RNOR), not full residents, so their foreign income stays largely out of India's tax net.
What genuinely changes from 1 April 2026 is procedural: the Income-tax Act, 2025 has replaced the Income-tax Act, 1961, renumbering sections and replacing the terms "previous year" and "assessment year" with "tax year." The residency tests themselves carry over unchanged. This piece walks you through the current India tax residency rules, what actually changed on 1 April 2026, and how you should prepare to handle your NRI tax residency confidently.
Understanding Current NRI Tax Residency Rules in India
Basic residency criteria under the Income-tax Act
Indian tax law uses your residential status to determine your tax liability in India, not your citizenship. These tests were first enacted under the Income-tax Act, 1961 and continue, unchanged, under the Income-tax Act, 2025, which replaced the 1961 Act from 1 April 2026. You could be an Indian citizen yet classified as a non-resident for tax purposes. The Act establishes two main conditions to establish residency. You qualify as a resident if you stay in India for 182 days or more during a financial year. You're also a resident if you stay for 60 days or more in the current year and have spent 365 days or more in the preceding four years.
Your residential status falls into three categories: Resident and Ordinarily Resident (ROR), Resident but Not Ordinarily Resident (RNOR), or Non-Resident (NR). Each classification carries different tax obligations. Use our residential status calculator and determine where you stand.
The 60-day and 182-day stay thresholds
The 182-day rule is straightforward. You're classified as a tax resident if you stay in India for 182 days or more in a tax year. This main criterion remains unchanged in current regulations.
The 60-day rule works differently. Staying 60 days in India during the current year combined with 365 days over the past four years made you a resident. But exemptions now apply for Indian citizens working abroad and crew members of Indian ships, who are no longer subject to the 60-day rule.
Special provisions for Indian citizens and PIOs
Most important modifications exist for Indian citizens and PIOs visiting India. The 60-day threshold extends to 120 days if your total income from Indian sources (excluding foreign income) exceeds ₹15 lakh. This means you're classified as RNOR if you stay 120 days or more in the current year and have spent 365 days in the past four years.
This amendment targets individuals who carry out most important commercial activities from India while managing their stay to maintain NRI status by limiting visits to less than 182 days. Understanding dual tax residency becomes most important in such scenarios.
Deemed residency rule under Section 6(1A)
Section 6(1A) introduces deemed residency for Indian citizens earning ₹15 lakh or more from Indian sources who aren't liable to pay tax in any other country. This provision affects Indians living in tax-free jurisdictions like UAE and Saudi Arabia. You can be classified as a tax resident without ever visiting India.
Deemed residents are categorized as RNOR and taxed that way. A tax residency certificate from another country can help clarify your status.
Key Changes in NRI Tax Residency Rules Since 2020 (and What April 2026 Really Changed)
120-day stay threshold for high-income NRIs
The 120-day threshold for NRIs earning ₹15 lakh or more from Indian sources was introduced by the Finance Act, 2020 and has applied since Assessment Year 2021-22 (FY 2020-21); it is not a new change from April 2026. You're classified as RNOR if you stay 120 days or more in India during a financial year and have accumulated 365 days or more in the preceding four years. For this income band, the 120-day limit is actually a tightening: before this rule, visiting citizens and PIOs got the benefit of a 182-day threshold, so high earners now need fewer days in India (not more) to be treated as resident.
The rule targets business travelers and those with strong ties to India who previously had to manage their visits carefully to stay under the 182-day mark available to this category; high earners must now watch the lower 120-day mark instead. You maintain NRI status if your stay remains below 120 days (and below 182 days) with less than 365 days in the past four years.
Deemed residency for Indians in tax-free jurisdictions
Section 6(1A) of the 1961 Act (carried forward into Section 6 of the Income-tax Act, 2025) targets Indian citizens residing in tax-free jurisdictions like UAE, Monaco, or Bermuda, and has applied since Assessment Year 2021-22, not from April 2026. You're deemed a tax resident of India, classified as RNOR and not a full resident, if you earn ₹15 lakh or more from Indian sources but aren't liable to pay tax abroad by reason of domicile, residence, or any similar criterion. This rule applies even if you spend zero days in India during the year.
The provision prevents tax avoidance by those leveraging low-tax or no-tax jurisdictions. Indian citizens in these countries who meet the income threshold are classified as RNOR in India automatically, so their foreign-sourced income generally stays outside India's tax net.
Effect on RNOR classification
These rules affect how you achieve RNOR status directly. The 120-day threshold combined with the 365-day condition creates a pathway to RNOR classification for high-income individuals. Deemed residents also move from NR to RNOR status.
Changes in income threshold applicability
The ₹15 lakh threshold applies to Indian-sourced income and excludes foreign income. This calculation determines whether the 120-day rule or deemed residency provision affects you.
Tax Implications Under the New Rules for NRIs
Tax treatment for Non-Residents (NRI status)
NRI taxation in India follows the source rule. Income that accrues or arises in India or through an Indian source is taxable, while income earned outside India remains exempt. This has salary received in India, salary for services rendered in India, rent from Indian property, capital gains on Indian assets, and interest on Indian deposits.
You must file a tax return if your annual Indian income exceeds the basic exemption limit: ₹4 lakh under the new tax regime (the default regime) or ₹2.5 lakh if you opt for the old regime. Interest earned on NRE and FCNR accounts is tax-free, while interest on NRO accounts is taxable. You can claim a standard deduction of 30% on rental income from Indian property. Capital gains exemptions are available under Sections 54, 54F, and 54EC, subject to specific conditions.
Tax treatment for RNOR status
RNOR status provides tax treatment as with NRI status. Income received or deemed to be received in India is taxable, along with income that accrues or arises in India. Income from a business controlled from India is taxable, even if earned and received outside India. Income from sources outside India that accrues and is received abroad remains non-taxable.
RNOR status is reassessed every year, not fixed for a set number of years: you qualify if you were non-resident in 9 of the preceding 10 years, or present in India 729 days or less in the preceding 7 years. For most returning NRIs this works out to roughly 2-3 financial years. Foreign-sourced income remains tax-exempt in India for as long as you meet the RNOR test.
Tax treatment for Resident Ordinary status
Global income is taxable in India once you become a full resident. This has income earned both within and outside India, except for concessions available under DTAA. The change from RNOR to Resident status triggers taxation on worldwide earnings.
Foreign income exemptions and global taxation
Understanding dual tax residency is important to manage tax obligations. DTAA treaties between India and over 90 countries help avoid double taxation. A tax residency certificate from foreign tax authorities establishes your residential status to claim DTAA benefits.
How NRIs Should Prepare Under the Current Tax Residency Rules
Proactive planning and monitoring stay critical under these tax residency rules, which remain in force under the Income-tax Act, 2025. Here's how you can prepare.
Track your days spent in India
Maintain a detailed log of travel dates spanning in the last 10 years and include entry and exit stamps from your passport. Count both arrival and departure days as presence in India. Limit visits below 120 days if your Indian income exceeds ₹15 lakh. Spread travel across different tax years to manage thresholds.
Review your Indian income sources
Compile all income sources earned in India. This includes salary, property rent, capital gains and interest from deposits. Keep Indian income below ₹15 lakh if possible to avoid triggering the 120-day rule.
Review your tax residency status
Confirm your residential status for each financial year using our residential status calculator. Tax status changes based on stay patterns and income levels, so you need to check it annually.
Plan investments and remittances
Structure property and business income to minimize tax liability. Update NRE and NRO account designations when status changes. Understand dual tax residency implications for cross-border income.
Consult with tax professionals
These amendments are complex. Consulting qualified tax advisors helps optimize compliance and reduce tax burdens.
Update compliance and documentation
File Form 67 before submitting returns to claim foreign tax credits. Get a tax residency certificate from foreign authorities for DTAA benefits. Maintain centralized files with property documents, returns and bank statements.
Conclusion
India's NRI tax residency rules can seem complex at first, but good preparation makes compliance straightforward. These rules, in force since Assessment Year 2021-22 and carried forward unchanged into the Income-tax Act, 2025 from 1 April 2026, reward early monitoring, especially if your Indian income exceeds ₹15 lakh. Understanding whether you qualify as an NRI or OCI helps you apply them correctly. Plan ahead and you'll avoid unexpected tax liabilities while staying compliant.
Frequently asked questions
What is the 120-day rule for NRIs, and did it change in April 2026?
If your Indian-sourced income exceeds ₹15 lakh, you will be considered a resident (RNOR) if you stay in India for 120 days or more in a financial year and meet the 365-day condition over the past four years. This rule has applied since Assessment Year 2021-22 (Finance Act, 2020); it did not change on 1 April 2026, which is when the recodified Income-tax Act, 2025 took effect instead.
What is deemed residency for NRIs?
Deemed residency applies to Indian citizens earning ₹15 lakh+ from India but not paying tax in any other country. Such individuals will be treated as tax residents (RNOR) in India - even if they don’t visit India at all.
Will my foreign income be taxed in India under these new rules?
If you qualify as RNOR, your foreign income is generally not taxed in India, unless it is derived from a business controlled from India. Full global taxation applies only when you become a Resident and Ordinarily Resident (ROR).
How can I avoid becoming a tax resident in India?
You can manage your residency status by:
- Keeping your stay in India below 120 days (if applicable)
- Monitoring your Indian income to stay below ₹15 lakh (if feasible)
- Maintaining valid tax residency in another country