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Short answer: India first determines your residential status for the specific tax year, then applies that year’s statutory scope-of-total-income rules to each item of income. “NRI” is common shorthand, not a complete tax classification: you may be resident, resident but not ordinarily resident (RNOR), or non-resident for income-tax purposes. The governing Act also changes for tax years beginning on or after 1 April 2026, so a correct answer must be year-specific.
Start with the tax year and the applicable Act
India’s residence and income rules are applied separately for each tax year. The Income Tax Department states that tax years beginning before 1 April 2026 remain governed by the Income Tax Act, 1961. Tax years beginning on or after 1 April 2026 are governed by the Income Tax Act, 2025. A person who spends time in India on both sides of that date may therefore need two separate status determinations, using the relevant lookback periods for each year.
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| Tax year begins | Governing law | Practical implication |
|---|---|---|
| Before 1 April 2026 | Income Tax Act, 1961 | Apply the 1961 Act’s residence and scope-of-total-income provisions. |
| On or after 1 April 2026 | Income Tax Act, 2025 | Apply the 2025 Act, including its transition and continuity rules. |
Do not assume that a status calculated for one year carries automatically into the next. Days in earlier years can still matter because the residence tests use lookback periods.
How India classifies an individual’s residential status
Resident test for AY 2026-27
For AY 2026-27, the Income Tax Department describes an individual as resident in the relevant previous year if either of these tests is met:
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- The individual is in India for 182 days or more during that previous year; or
- The individual is in India for 60 days or more during that year and for 365 days or more in total during the four immediately preceding years.
If neither condition is satisfied, the individual is treated as non-resident for that previous year, subject to statutory exceptions and the deemed-residence rule. Count the days carefully, retain travel records and apply the rules for the relevant year rather than relying on a calendar-year total.
Visitor and departure exceptions
The 60-day test is modified for certain Indian citizens and persons of Indian origin (PIOs). For some people visiting India, the relevant threshold is generally substituted with 182 days. A 120-day threshold can apply to qualifying visitors whose income other than foreign-source income exceeds ₹15 lakh. The exact conditions depend on citizenship or PIO status, the purpose of the visit and the statutory wording for that year.
Separate departure rules can affect an Indian citizen leaving India for employment abroad or as a crew member. Treat these as fact-sensitive exceptions: establish the person’s purpose, departure date, prior-year days and income composition before applying a threshold.
Deemed residence
A qualifying Indian citizen with more than ₹15 lakh of income other than foreign-source income who is not liable to tax in another country can be deemed resident, regardless of the number of days spent in India. This rule is not a general test for every overseas Indian. It requires the statutory conditions to be checked for the particular year, including what counts as foreign-source income and whether the person is liable to tax elsewhere.
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RNOR is different from both resident and non-resident
After an individual is found to be resident, the next question is whether the person is “ordinarily resident” or “not ordinarily resident” (RNOR). The Income Tax Department identifies an individual as RNOR when either condition is met:
- The individual was non-resident in nine out of the ten preceding years; or
- The individual was in India for 729 days or less in total during the seven preceding years.
RNOR is therefore a separate resident category determined by historical residence and day counts. It is not another name for an NRI, and it should not be selected merely because someone has recently returned to India or maintains an overseas home.
For years governed by the 2025 Act, the Department’s transition guidance indicates that continuity tests may look back to years governed by the 1961 Act. Keep prior tax returns, travel calendars and residence calculations so the nine-of-ten and seven-year tests can be reconstructed.
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Residential status is only the first step. The applicable Act’s scope-of-total-income provision determines which income is included for an individual in that status. For every receipt, analyse three separate facts:
- Where was it received? Record the first place the income was received, not merely where it was later transferred.
- Where did it accrue or arise? Identify the activity, asset, employment or right that generated it.
- Is it treated as arising in India by a deeming rule? Some provisions can deem income to arise in India even when payment or performance occurs elsewhere.
The precise statutory wording for section 5 of the 1961 Act and its corresponding provision in the 2025 Act must be checked for the tax year concerned. Because the applicable text and explanatory treatment determine how foreign income received, foreign accrual and deemed Indian accrual interact with each status, a categorical “all worldwide income” or “only Indian income” table would be unsafe without that verification.
| Fact to establish | Documents to retain | Why it matters |
|---|---|---|
| Tax year and governing Act | Assessment-year details, the relevant Act and transition notes | The statutory wording may differ before and after 1 April 2026. |
| Days in India | Passport stamps, immigration history, flight records | Determines resident, non-resident and visitor-exception outcomes. |
| Prior-year residence | Earlier returns and day-count schedules | Needed for the 365-day, nine-of-ten and 729-day tests. |
| Receipt location | Bank statements, remittance instructions and payroll records | Supports the received-in-India analysis. |
| Source and accrual | Employment contracts, invoices, property records and investment statements | Supports where income arose and whether a deeming rule may apply. |
| Taxability abroad | Foreign tax returns, certificates and residence documents | Relevant to the deemed-residence conditions and relief analysis. |
Inventory every income head before deciding what to report
Make a complete list under the usual income heads. The head tells you what the payment is; it does not, by itself, settle whether the item falls within India’s taxable scope.
Salary and pension
For employment income, record the employer, work location, duties performed in India, pay dates, the account receiving the salary and any stock, bonus or pension component. A salary paid by an overseas employer can still require a detailed source and accrual analysis. Do not decide solely from the currency of payment or the location of the bank account.
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Income from house property
List rent, deemed rental figures where applicable, municipal taxes, interest and the property’s location. Indian property facts need to be separated from overseas property facts, and the applicable Act must then be applied to each item.
Profits and gains of business or profession
For a business, profession, consultancy or freelancing activity, map where services were performed, where contracts were managed, where customers are located and where payment was received. Keep invoices, contracts, ledgers and expense records. Business income can also affect whether a person is eligible for a particular return form.
Capital gains
Record the asset, acquisition and transfer dates, location of the asset, sale consideration, cost and taxes paid. Shares, securities, property and other assets can have different source and deeming rules, so classify each transaction separately rather than aggregating all investment proceeds as “foreign income.”
Income from other sources
Include interest, dividends, gifts where relevant, royalties and miscellaneous receipts in the inventory. For bank interest, identify the account type, the bank’s location, the credit date and any exemption claimed under a separate provision.
A practical status-by-status framework
If you are resident
First complete the resident test, then classify each income item under the applicable scope-of-total-income provision for that year. Include Indian receipts and Indian accruals in the review, and separately analyse every foreign item by its receipt location, place of accrual and any deeming rule. Do not rely on a residency label to bypass source analysis.
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If you are RNOR
Confirm the nine-of-ten and 729-day tests with evidence from earlier years. Then apply the scope provision applicable to that tax year to each income item. RNOR status is not interchangeable with non-resident status; using the wrong category can change both the income reviewed and the disclosures expected on the return.
If you are non-resident
Determine whether any income was received in India, accrued or arose in India, or is deemed to accrue or arise in India under the applicable Act. Also examine foreign income separately rather than assuming it is outside India merely because you live abroad. The source, receipt and deeming facts must be documented for each item.
Return forms: useful filing guidance, not a taxability test
For non-resident individuals, the Income Tax Department lists ITR-2 where there is no income under the head “Profits and gains of business or profession,” and ITR-3 where business or profession income is present, alongside the applicable salary or pension, house-property, capital-gains and other-sources schedules. Form eligibility answers a filing question; it does not decide whether a particular receipt is within the taxable scope of the Act.
Before filing, reconcile the return with tax deducted at source, foreign statements, remittances and any tax paid overseas. Keep a written status calculation for the year in case the day count or RNOR history is later questioned.
Common mistakes that produce the wrong answer
- Using “NRI” as the legal answer: Determine non-resident, resident or RNOR status for the specific year.
- Mixing tax years: Apply the 1961 Act to tax years beginning before 1 April 2026 and the 2025 Act to those beginning on or after that date.
- Counting only the current year: The 365-day, nine-of-ten and 729-day tests require earlier-year records.
- Ignoring the 120-day and deemed-residence rules: They can matter for qualifying Indian citizens and PIO visitors with more than ₹15 lakh of non-foreign-source income.
- Confusing income-tax residence with FEMA residence: An NRE-account exemption depends on FEMA status or RBI permission, not simply on an income-tax label.
- Treating a return form as proof of taxability: ITR-2 or ITR-3 selection does not replace the scope-of-total-income analysis.
Year-end checklist
- Write down the exact tax year and identify whether it begins before or after 1 April 2026.
- Calculate India stay days for that year and the required lookback periods.
- Test the standard resident conditions and any citizenship, PIO, visit, departure or deemed-residence exception.
- If resident, calculate RNOR status using the nine-of-ten and 729-day tests.
- Prepare an income inventory under salary, house property, business or profession, capital gains and other sources.
- For every item, record receipt location, accrual or arising location and any possible deeming rule.
- Check the scope-of-total-income provision in the Act applicable to that year before treating foreign income as included or excluded.
- Select the return form only after the income heads and business-income status are known.
- Retain travel, banking, payroll, property, investment and foreign-tax records supporting every conclusion.
When specialist advice is warranted
Obtain advice from a qualified Indian chartered accountant or cross-border tax professional when your stay crosses 1 April 2026, you may be deemed resident, your RNOR history spans several countries, you have employment or business activity in more than one jurisdiction, or you are claiming relief connected with foreign tax or FEMA status. Ask the adviser to state the tax year, governing Act, residence category, scope provision and source analysis in writing.
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