Tax residency rules in India are changing from April 2026, and these shifts could substantially affect how you're taxed as an NRI. The Income Tax Bill 2025 will increase the stay threshold from 60 days to 120 days if you earn ₹15 lakh or more from Indian sources. Indians earning above this limit in tax-free jurisdictions will be treated as full residents, even with zero days spent in India.
You need to understand these new rules for NRI in India to plan taxes and ensure compliance effectively. This piece will walk you through the current India tax residency rules, what's changing from April 2026, and how you should prepare to handle these NRI tax residency rules confidently.
Understanding Current NRI Tax Residency Rules in India
Basic residency criteria under Income Tax Act 1961
The Income Tax Act 1961 uses your residential status to determine your tax liability in India, not your citizenship. 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 from April 2026
120-day stay threshold for high-income NRIs
The Income Tax Bill 2025 replaces the 60-day threshold with a 120-day limit for NRIs earning ₹15 lakh or more from Indian sources. You'll be classified as RNOR starting April 1, 2026, 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. High-earning NRIs can now spend twice as much time in India without altering their residential status.
The amendment targets business travelers and those with strong ties to India who previously had to manage their visits carefully to stay under the 60-day mark. 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
The most important provision targets Indian citizens residing in tax-free jurisdictions like UAE, Monaco, or Bermuda. You'll be treated as a full tax resident of India if you earn ₹15 lakh or more from Indian sources but aren't liable to pay taxes abroad. This rule applies even if you spend zero days in India during the year.
The provision wants to prevent tax avoidance by those leveraging low-tax or no-tax jurisdictions. Indian citizens in these countries who meet the income threshold will be classified as RNOR in India automatically.
Effect on RNOR classification
These changes affect how you achieve RNOR status directly. The 120-day threshold combined with the 365-day condition creates a new 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 new 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 tax returns if your annual Indian income exceeds ₹2.5 lakh. 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.
You can retain RNOR status for up to 3 financial years after returning to India. Foreign-sourced income continues to remain tax-exempt in India during this period.
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 for the April 2026 Changes
Proactive planning and monitoring become critical with these tax residency rules coming into effect. 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
The April 2026 tax residency changes might seem complex at first, but good preparation makes compliance straightforward. Start monitoring your days in India now, especially if your Indian income exceeds ₹15 lakh. Understanding whether you qualify as an NRI or OCI helps you apply these rules correctly. Plan ahead and you'll avoid unexpected tax liabilities while maintaining compliance with the new regulations.
Frequently asked questions
What is the new 120-day rule for NRIs from 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.
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