A non-resident Indian is someone whose physical presence in India during the financial year (April 1 to March 31) falls below the thresholds set by the Income Tax Act of 1961, which means India can tax only the income you earn or receive within India rather than your worldwide earnings. The classification also governs which bank accounts you can hold in India and what property you can buy. Two separate laws actually define the status — the Income Tax Act for tax purposes and the Foreign Exchange Management Act (FEMA) of 1999 for banking, investment, and property matters — and they use different tests, so it’s possible to be treated one way for tax and another way for foreign-exchange rules.
FEMA looks at purpose and intent: if you’ve left India for employment, business, a professional vocation, or any circumstance that suggests you’ll stay abroad indefinitely, you’re a person resident outside India. The Income Tax Act ignores intent and counts days. Because the tax consequences are what drive most decisions, the day-count rules are where to start.
The Day-Count Tests
You’re a resident of India for a financial year if you meet either of two tests:1Indian Kanoon. Section 6 in The Income Tax Act, 1961
- You were physically present in India for 182 days or more during the year, or
- You were in India for at least 60 days during the year and at least 365 days total across the four preceding financial years.
Fail both tests and you’re a non-resident for that year. The status resets every April 1, so travel patterns can flip it from one year to the next.
Exceptions That Matter
Two modifications to the 60-day threshold change the picture for most working NRIs. Indian citizens who leave India during the year for employment abroad, or as crew on an Indian ship, get the 60-day figure raised to 182 days.1Indian Kanoon. Section 6 in The Income Tax Act, 1961 That’s where a working NRI’s protection lives: a two- or three-month visit home won’t accidentally make you a resident.
A different modification cuts the other way. Indian citizens or persons of Indian origin visiting India whose taxable Indian income (excluding foreign-source income) exceeds ₹15 lakh face a 120-day threshold instead of 60. If you draw substantial rental or investment income from India and spend more than four months there while also meeting the 365-day lookback, you can cross into resident status earlier than expected.2Income Tax Department. Non-Resident Individual for AY 2025-26
Deemed Residency for Indian Citizens Abroad
From Assessment Year 2021-22 onward, Section 6(1A) sidesteps day-counting entirely for a specific group. An Indian citizen with total Indian-source income above ₹15 lakh (excluding income from foreign sources), who is not liable to pay tax in any other country, is treated as a tax resident of India regardless of how few days they spent there.2Income Tax Department. Non-Resident Individual for AY 2025-26
The provision targets Indian citizens living in zero-tax jurisdictions such as the UAE or Bahamas who earn significant Indian income while managing their days carefully. If you live in a country that imposes income tax at all, the rule generally doesn’t apply, because you are liable to tax there even if your actual bill comes out low after deductions or credits. Anyone with Indian income near the ₹15 lakh line who splits time between India and a low-tax country should still track this carefully.
Resident but Not Ordinarily Resident
Between full resident and non-resident sits a third status that matters most for anyone moving back to India. You qualify as Resident but Not Ordinarily Resident (RNOR) if you meet the day-count test for residency but also satisfy one of these:
- You were a non-resident in at least 9 of the 10 financial years preceding the current year, or
- You spent 729 days or fewer in India during the 7 financial years preceding the current year.
While classified as RNOR, India taxes only your Indian-source income — the same scope as a non-resident. Foreign salary, overseas investment gains, and interest on foreign bank accounts stay outside India’s reach. For most returning NRIs this window runs two to three years, providing time to restructure foreign holdings before full resident taxation applies. Missing it is expensive.
What India Taxes and at What Rate
As a non-resident, India taxes only income you earn or receive within India: salary for work performed in India, rent from Indian property, interest on Indian bank deposits, dividends from Indian companies, and capital gains from selling Indian assets. Income earned entirely outside India stays outside it.2Income Tax Department. Non-Resident Individual for AY 2025-26
Withholding is where NRIs get hit. Tax Deducted at Source (TDS) rates run considerably higher than for residents, and there’s no threshold exemption; withholding applies from the first rupee. The main rates as of 2026:
- Rental income: 30% plus health and education cess (31.2% effective)
- NRO fixed deposit interest: 30% plus cess (31.2%)
- Dividends from Indian companies: 20% plus cess (20.8%)
- Long-term capital gains on property held over 24 months: 12.5% plus cess (13%)
- Short-term capital gains on property: 30% plus cess (31.2%)
- NRE and FCNR deposit interest: exempt from Indian tax
These rates frequently pull more tax than you actually owe, especially when total Indian income sits below the basic exemption limit. Filing an Indian return to claim a refund is standard for NRIs with Indian-source income; skipping it leaves money on the table.
Avoiding Double Taxation
If you live in a country that taxes worldwide income — the United States, United Kingdom, Canada, or Australia, for example — the same Indian income could be taxed in both countries. India offers two routes out.
Section 90 applies to countries that have signed a Double Taxation Avoidance Agreement (DTAA) with India, and over 90 countries currently have one. Under a DTAA, you can usually claim a foreign tax credit in your country of residence for taxes paid in India, or exempt the income in one country, depending on the treaty. To claim DTAA benefits on Indian income you file Form 10F along with a Tax Residency Certificate from your country of residence.
Section 91 provides unilateral relief when no treaty exists. You get credit for the lower of the two tax rates applied to the doubly taxed income. It’s less generous than a well-structured DTAA but prevents the full double hit.
NRI Bank Accounts
Once you become a non-resident, Indian banking rules require converting regular savings accounts to NRI-specific types. Three options serve different purposes.
An NRE (Non-Resident External) account holds foreign earnings converted to Indian rupees. Both principal and interest are fully repatriable, and interest is exempt from Indian income tax.2Income Tax Department. Non-Resident Individual for AY 2025-26
An NRO (Non-Resident Ordinary) account holds income you earn within India, such as rent, dividends, or pension payments. Interest is taxable in India at the TDS rates above. Repatriation of capital funds is capped at USD 1 million per financial year, though current income like rent and dividends can be repatriated after tax without counting toward that cap.
An FCNR (Foreign Currency Non-Resident) account is a fixed deposit held in foreign currency rather than rupees, so principal carries no exchange-rate risk. Interest is exempt from Indian tax, and both principal and interest are fully repatriable. Transfers between NRE and FCNR accounts are permitted without Reserve Bank of India approval. If you return to India permanently, NRE and FCNR accounts must be converted to resident accounts or redesignated as resident foreign-currency accounts.
Buying Property in India
NRIs can freely purchase residential and commercial property in India without special approval. The restriction is on agricultural land, farmhouses, and plantation property, which you cannot buy directly, though you can inherit them from someone who was a resident of India.3Ministry of External Affairs, Government of India. Acquisition and Transfer of Immovable Property in India Inherited agricultural land can only be sold to an Indian citizen permanently residing in India.
Repatriation of sale proceeds depends on how the property was originally paid for. For property bought with Indian-rupee funds, proceeds can be repatriated through your NRO account, subject to the USD 1 million annual cap.4Reserve Bank of India. Purchase of Immovable Property For property bought with foreign-currency funds routed through an NRE or FCNR account, repatriation is permitted up to the amount originally brought in for the purchase.3Ministry of External Affairs, Government of India. Acquisition and Transfer of Immovable Property in India
NRI Is Not the Same as OCI
NRI status is about where you live. Overseas Citizen of India (OCI) is a registration granted to foreign nationals of Indian origin under the Citizenship Act of 1955, allowing them to live and work in India without a visa for an indefinite period. OCI cardholders get most of the rights of Indian citizens, with two exceptions: they cannot vote in Indian elections and cannot purchase agricultural land. The former Person of Indian Origin (PIO) card scheme was folded into the OCI program in January 2015, so all former PIO cardholders are now treated as OCI cardholders.5Ministry of External Affairs, Government of India. FAQ on Overseas Indians (OCIs, PIOs and NRIs)
The two classifications run on separate tracks. You can hold OCI status and simultaneously be an NRI, which just means you’re a registered foreign national of Indian origin who currently lives abroad. Or you can be an OCI cardholder who has moved to India and now qualifies as a resident under the day-count rules. OCI tells India who you are by heritage; NRI tells India where you live.