Income Tax Act, 2025: NRI tax residency in India—182-day stay rule, ₹15 lakh threshold and ITR exemption condition

Living overseas does not automatically make an Indian citizen a non-resident for income-tax purposes. The determination depends on the number of days spent in India, the nature of income earned, and the individual’s residential history.

Under Section 115G of the Income-tax Act, 1961, non-resident Indians (NRIs) are exempt from filing an income-tax return (ITR) if their total income consists only of investment income, long-term capital gains, or both (subject to TDS).

With the Income-tax Act, 2025 coming into force on 1 April 2026, tax residency, tax liability and ITR filing requirements remain unchanged. But understanding the applicable residency rules and return-filing requirements remains important for Indians living abroad.

How is Indian tax residency determined?

Under Section 6 of the Income-tax Act, 2025, an individual is treated as a resident if they stay in India for at least 182 days during the relevant tax year.

Alternatively, they may qualify as a resident if they spend at least 60 days in India during that year and at least 365 days in the preceding four years. These conditions are identical to those in Section 6(1) of the old Income-tax Act, 1961.

Indian citizens leaving the country for employment abroad, or as crew members of Indian ships, are eligible for a relaxation. For them, the 60-day test combined with the 365-day requirement does not apply. They qualify as residents only if their stay in India reaches 182 days during the relevant tax year.

Why does ₹15 lakh income threshold matter?

Different conditions apply to Indian citizens and persons of Indian origin (PIOs) visiting India. They are generally treated as residents if their stay exceeds 182 days during the tax year.

However, if their income other than income from foreign sources exceeds ₹15 lakh, the alternative residency test may apply. In such cases, the 60-day threshold is replaced by 120 days, provided they have also spent at least 365 days in India during the preceding four years.

What is deemed residency?

An Indian citizen can also be treated as a deemed resident if their income, excluding income from foreign sources, exceeds ₹15 lakh in a year and they are not liable to tax in another country on the basis of domicile, residence or a similar criterion.

This provision does not depend on the number of days spent in India. Individuals covered by this rule are classified as residents but not ordinarily resident (RNOR).

How is tax residency determined when stay spans the old and new income-tax acts?

Residential status is assessed separately for each year. If an individual’s stay in India spans FY 2025-26 and FY 2026-27, their residential status for FY 2025-26 (AY 2026-27) will be determined under the Income-tax Act, 1961, based on their stay up to 31 March 2026.

For FY 2026-27, the Income-tax Act, 2025, will apply, with the period of stay from 1 April 2026 onwards considered for this purpose. However, when applying the test of 60 days in the relevant tax year and 365 days in the preceding four tax years, the individual’s stay during FY 2025-26 and earlier years will be considered.

Disclaimer: This is for informational purposes only. Please visit the official website for the latest updates and consult a tax expert.