NRI Residency Status Changes from 1 April 2026 – Are You Now a Tax Resident of India?

If you are an NRI visiting India for an extended stay — or an Indian professional living in the UAE, Saudi Arabia, Bahrain, or any zero-tax jurisdiction — you need to read this before 1 April 2026. The Income Tax Act 2025, effective from that date, carries forward and formalises two rules that could change your tax residency status dramatically: the 120-day threshold for high-income visiting NRIs, and the deemed residency rule that taxes you as a resident of India even if you never set foot here. Your global income could become taxable in India — and most NRIs don’t realise it until after the financial year ends.

Quick Answer — 3 Questions That Determine Your Status

1. Did you stay in India for 182+ days this year?→ You are a full Resident. Global income is taxable.

2. Is your Indian income above ₹15L and did you stay 120–181 days?→ You are likely RNOR. Only Indian income is taxable.

3. Are you in UAE/Gulf with Indian income above ₹15L and no tax paid anywhere?→ You are a Deemed Resident. Global income becomes taxable.

How the Old Residency Rules Worked

Under the Income Tax Act 1961, an individual was treated as a tax resident of India if either of two conditions was satisfied: staying in India for 182 days or more in the financial year, or staying for 60 days or more in the financial year AND 365 days or more in the preceding four years.

For Indian citizens and Persons of Indian Origin (PIOs) visiting India, however, the 60-day rule was relaxed — the threshold was raised to 182 days. This meant a visiting NRI could stay for up to 181 days in India without triggering resident status, regardless of their income level. This was the “safe zone” most NRIs used to plan their India visits.

The Finance Act 2020 changed this for one specific category — high-income NRIs. It substituted the 60-day threshold with 120 days for Indian citizens and PIOs whose total Indian income (excluding foreign income) exceeded ₹15 lakh. The Income Tax Act 2025 retains this rule exactly as introduced by Finance Act 2020 — it does not introduce a new change, but it codifies and continues the rule in the new statutory framework. This makes 1 April 2026 a critical date because the new Act comes into force.

What Changes from 1 April 2026

The Income Tax Act 2025 introduces no new NRI residency changes beyond what Finance Act 2020 had already brought in. However, it is essential to understand the framework as it stands effective 1 April 2026 under the new Act:

Important Clarification

The 120-day and deemed residency rules result in RNOR status — not full resident status. This means only Indian income remains taxable; foreign income is still largely exempt. The critical worry for many NRIs — that their global income will suddenly be taxed in India — applies only when they cross the 182-day threshold or when they lose RNOR status and become a full Resident and Ordinarily Resident (ROR).

Complete Status Matrix — NRI vs RNOR vs ROR

Status

NRI

Non-Resident Indian — stays < 120/182 days with income < ₹15L, or < 182 days with income > ₹15L but meeting stay exemption

Status

RNOR

Resident but Not Ordinarily Resident — stays 120–181 days with ₹15L+ income, or returning NRI within 2–3 years of return

Status

ROR

Resident and Ordinarily Resident — stays 182+ days; global income fully taxable in India

This table underscores the critical difference between RNOR and ROR. An RNOR — whether triggered by the 120-day rule or by returning from abroad — enjoys the same foreign income exemption as an NRI. The only trigger for global taxation is crossing into full resident (ROR) status.

The 120-Day Rule Explained in Detail

The 120-day rule applies specifically to Indian citizens and Persons of Indian Origin (PIOs) who are visiting India (i.e., they ordinarily reside outside India) and whose total Indian income, excluding foreign income, exceeds ₹15 lakh in the financial year. For this category, if they satisfy both of the following, they become RNOR rather than NRI:

• They stay in India for 120 days or more but less than 182 days in the financial year; AND
• They have stayed in India for 365 days or more in total during the preceding four financial years

If only the first condition is met (120+ days in the year) but not the second (365 days in preceding 4 years) — they remain an NRI for that year. Both conditions must be satisfied simultaneously.

Worked Example — Rajiv, NRI in London

Rajiv is an Indian citizen living in the UK. He earns ₹22 lakh per year from Indian rental properties and fixed deposits — well above the ₹15 lakh threshold. He visits India every year to manage his properties.

√ Key Takeaway

Even in Scenario C (RNOR), Rajiv’s foreign income — his UK salary, UK savings interest, any UK capital gains — remains exempt from Indian tax. Becoming RNOR does NOT mean paying Indian tax on global income. It means the same tax treatment as an NRI on foreign income, plus paying tax on Indian income (which Rajiv was already doing as an NRI).

The Deemed Residency Rule — Critical for UAE and Gulf NRIs

This is the rule that most NRIs in the Gulf region are understandably anxious about. Under Section 6(1A) of the Income Tax Act 1961 (introduced by Finance Act 2020 and continued in the new Act), an Indian citizen will be treated as a deemed resident of India — and classified as RNOR — if ALL of the following conditions are met:

• The person is an Indian citizen (not an OCI card holder, not a PIO who is a foreign citizen)
• Their total Indian income, excluding foreign income, exceeds ₹15 lakh in the financial year
• They are not liable to pay tax in any other country or territory — by reason of domicile, residence, or any other criteria

UAE, Bahrain, Qatar, Kuwait, Saudi Arabia — Read This

These countries levy zero personal income tax. An Indian citizen living in any of these countries who earns ₹15 lakh+ from Indian sources (NRO interest, rental income, capital gains, dividends, etc.) is not “liable to tax” in UAE. Under the deemed residency rule, such a person is treated as a deemed resident of India — RNOR status — even if they spent zero days in India during the year. This was the law from FY 2020-21 and continues under the new Act.

What Deemed Residency Means in Practice

Being a deemed resident (RNOR) means only Indian income is taxable — the same as before for most Gulf NRIs who were already paying tax on their Indian income. The feared outcome — global income becoming taxable — does NOT happen under RNOR. It only happens if the deemed resident also somehow qualifies as Resident and Ordinarily Resident (ROR), which requires meeting the 182-day stay rule for multiple years.

However, deemed residency does have practical compliance consequences:

• The individual must file an ITR as a resident, not as an NRI
• They may need to disclose foreign assets in Schedule FA of the ITR (though for RNOR, foreign assets are not always reportable — consult your CA)
• TDS on their Indian income will be governed by resident provisions rather than NRI provisions in some cases
• They must ensure their Indian payers are aware of the correct status to deduct TDS at the right rate

i. Who Is NOT Covered by Deemed Residency

OCI (Overseas Citizen of India) card holders are explicitly excluded from the deemed residency rule. Foreign citizens of Indian origin are also not covered. The rule applies only to Indian passport holders who are not liable to tax in any country and have Indian income above ₹15 lakh.

RNOR Status — The Benefits You Must Strategically Preserve

Whether triggered by the 120-day rule (visiting NRI) or by returning to India permanently, RNOR is one of the most valuable tax statuses available under Indian law. It gives you the best of both worlds during a transition period.

Foreign Income Exemption

All income earned and received outside India is exempt from Indian tax for an RNOR — provided it does not arise from a business controlled or profession set up in India. This includes:

• Foreign salary or consulting income
• Rental income from overseas property
• Interest from foreign bank accounts
• Capital gains from sale of foreign investments
• Dividends from foreign companies

NRE and FCNR Account Interest Continues to Be Exempt

Interest earned on NRE savings accounts and FCNR fixed deposits is exempt from Indian income tax as long as the individual holds NRI or RNOR status. This exemption is lost only upon becoming a full Resident and Ordinarily Resident (ROR). This is particularly valuable for NRIs with large FCNR deposits — carefully timing the transition from RNOR to ROR can save significant tax.

Duration of RNOR Status for Returning NRIs

For an NRI who returns to India permanently, RNOR status typically lasts for two to three financial years after return, depending on their past stay history. The exact duration depends on whether the individual: was an NRI for nine out of the last ten financial years, and stayed in India for less than 730 days during the last seven years. If both conditions are met, they qualify as RNOR — and the longer they have been away, the longer RNOR status can be preserved.

Planning Tip for Returning NRIs

Returning to India after 2 October in any financial year means you will have spent less than 182 days in India in that year, which can help preserve RNOR status for that year and potentially extend the transition window. Timing your return and restructuring foreign investments and asset sales during the RNOR window can result in significant tax savings.

How Days in India Are Counted — Common Mistakes

Many NRIs make errors in counting their India stay, which leads to incorrect residency status determination:

Both Arrival and Departure Day Count

The day you arrive in India and the day you depart from India are both counted as days in India. If you fly in on 15 April and fly out on 14 June, that is 61 days — not 59 days as some people calculate.

All Visits Are Cumulated

There is no minimum continuous stay requirement. Three visits of 40 days each count as 120 days, which is identical to a single 120-day visit in terms of residency impact. NRIs who make multiple short trips to India tend to underestimate their cumulative stay.

The Preceding Four Years Count Is Rolling

For the second condition of the 120-day rule (365 days in preceding four years), each year you must recalculate using the actual four preceding years. A single year of extended stay four years ago can push you over the 365-day threshold without you realising it.

Maintain a Travel Log

Keep a detailed record of every trip to India — date of arrival, date of departure, passport number and immigration stamp reference. Airline boarding passes, hotel receipts, and bank account activity in India can all serve as corroborating evidence. In case of scrutiny, the burden of proof of non-residency is on the assessee.

FEMA Implications — Bank Accounts and Investments

Residency status under the Income Tax Act and under FEMA (Foreign Exchange Management Act) are determined separately. FEMA uses the criterion of residing outside India — your domicile and intention of settlement matter, not just the day count. However, when you become RNOR under income tax law, it is important to review your FEMA status simultaneously.

NRE and NRO Accounts

As long as you remain an NRI or RNOR under FEMA, you can continue to hold NRE and NRO accounts. Upon returning to India permanently and becoming a FEMA resident, NRE and NRO accounts must be converted to Resident Rupee accounts or RFC (Resident Foreign Currency) accounts within a reasonable time. Continuing to operate NRE/NRO accounts after FEMA residential status changes to resident constitutes a FEMA violation.

FEMA Residential Status for Visiting NRIs

A visiting NRI who triggers RNOR status under the Income Tax Act does NOT automatically change FEMA status. FEMA residency is determined by physical presence outside India and intention — a temporary extended visit to India does not make a genuine NRI a FEMA resident. However, if the stays become regular and extended year after year, it is advisable to review FEMA status with a professional.

Planning Checklist Before 1 April 2026

• Count your India days for FY 2025-26 — right now, before the year ends on 31 March 2026. If you are approaching 120 days and your Indian income is above ₹15 lakh, consider whether your cumulative stay in the preceding four years has crossed 365 days.
• Review your Indian income sources — total up NRO interest, rental income, dividends from Indian companies, and capital gains from Indian assets. If this exceeds ₹15 lakh, you fall within the scope of both the 120-day rule and the deemed residency rule.
• Gulf NRIs: check your tax liability in your country of residence — if you live in a zero-tax country and your Indian income exceeds ₹15 lakh, you are likely already a deemed resident under RNOR rules. Ensure you have been filing your ITR accordingly (as RNOR, not NRI) since FY 2020-21.
• Plan your India visits for FY 2026-27 — if you wish to retain NRI status, keep your India stay below 120 days (if your Indian income exceeds ₹15 lakh and you have been here 365+ days in the last 4 years). If your Indian income is below ₹15 lakh, the 60-day threshold does not apply to visiting Indian citizens — the threshold remains 182 days.
• Review NRE/FCNR deposits — if you anticipate losing RNOR status in the next year or two (because you are returning permanently), plan redemptions and reinvestments before the status change to preserve interest exemptions.
• Check your past ITR filings (FY 2020-21 to FY 2025-26) — the 120-day rule and deemed residency rule have been in force since FY 2020-21. If you were technically RNOR in any of those years but filed as NRI, there may be a compliance gap to address.
• Consult a CA for a residency status review — given the complexity of the two-condition test, the income threshold, and the interaction with FEMA, a professional review of your specific situation is the most reliable way to determine your correct status and plan accordingly.

Frequently Asked Questions

What is the 120-day rule for NRIs in India?

The 120-day rule applies to Indian citizens and PIOs visiting India whose total Indian income (excluding foreign income) exceeds ₹15 lakh. If such a person stays in India for 120 or more days in the financial year AND has stayed in India for 365 or more days in the preceding four years, they will be classified as RNOR rather than NRI. Both conditions must be satisfied. If only one condition is met, the person remains an NRI. This rule was introduced by Finance Act 2020 and continues under the Income Tax Act 2025.

Can a UAE-based NRI become a tax resident of India without visiting India?

Yes — under the deemed residency rule. An Indian citizen (not an OCI card holder) whose total Indian income exceeds ₹15 lakh and who is not liable to pay income tax in any other country will be treated as a deemed resident of India (RNOR status), even if they spend zero days in India. Since UAE, Saudi Arabia, Bahrain, Qatar, and Kuwait do not levy personal income tax, Indian citizens in these countries with significant Indian income are potentially covered by this rule.

What are the tax benefits of RNOR status?

An RNOR pays Indian tax only on income that accrues, arises, or is received in India — identical treatment to an NRI. All foreign income (foreign salary, overseas rental, foreign bank interest, foreign capital gains, foreign dividends) remains exempt from Indian tax. NRE account interest and FCNR deposit interest also continue to be exempt. The critical difference between RNOR and full Resident (ROR) is that a full resident must pay Indian tax on global income, while an RNOR does not.

Does the 120-day rule mean my foreign income will be taxed in India?

No. Triggering the 120-day rule results in RNOR status, not full Resident (ROR) status. As an RNOR, your foreign income remains exempt from Indian taxation. Your Indian income — which as an NRI you were already declaring and paying tax on — continues to be taxable as before. The feared scenario of global income taxation in India only applies when you become a full Resident and Ordinarily Resident (ROR), which requires staying 182 or more days in India.

Does the residency rule apply to OCI card holders?

OCI (Overseas Citizen of India) card holders are explicitly excluded from the deemed residency rule under Section 6(1A). The deemed residency rule applies only to Indian citizens. OCI card holders remain subject to the standard residency tests (182-day and 60-day rules), not the 120-day rule, and are not covered by the deemed residency provision.

How should I file my ITR if I am an RNOR?

RNOR individuals should file their ITR as a resident — not as an NRI. The applicable form is typically ITR-2 (for individuals without business income) or ITR-3 (if there is business income). In the residential status section of the form, select “Resident but Not Ordinarily Resident” (RNOR). You are not required to report foreign assets in Schedule FA if you are RNOR — this is one of the compliance benefits of RNOR versus full ROR status. However, given the complexity, filing through a CA is strongly advisable.