📌 A Detailed Guide on NRI Residential Status Under the Income Tax Act, 1961 🌍💰

 

🔍 Introduction

With globalization, many Indians live, work, and invest abroad while maintaining financial connections in India. If you are a Non-Resident Indian (NRI), understanding your residential status under the Income Tax Act, 1961 is crucial.

Your residential status determines your tax liability in India, affecting whether you pay tax on global income or just Indian income. Many NRIs are unaware of the tax rules, which may lead to unnecessary tax burdens or non-compliance with Indian tax laws.

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🏡 Understanding NRI Residential Status in India

📌 Who is an NRI?

An NRI (Non-Resident Indian) is an Indian citizen or a person of Indian origin (PIO) who does not meet the criteria to be classified as a Resident under Section 6 of the Income Tax Act, 1961.

📝 Residential Status Rules

As per Section 6(1) of the Income Tax Act, an individual is considered Resident in India if they satisfy any one of the following conditions:

Condition	Criteria
1️⃣   182-Day Rule	Stayed in India for 182 days or more in a financial year (FY).
2️⃣   60+365-Day Rule	Stayed in India for 60 days or more in a FY AND 365 days or more in the last 4 years.

📌 Special Relaxations for NRIs & Indian Citizens Working Abroad:

• If an Indian citizen leaves for employment or is a crew member of an Indian ship, the 60-day condition is extended to 182 days.
• If an NRI visits India, they are considered NRIs if their stay is below 182 days in a financial year.

📌 Illustration Example
🔹 Rahul, an Indian working in Canada, visits India for 150 days in FY 2024-25.
🔹 Since he stayed for less than 182 days, he qualifies as an NRI.

 

 

🔹 Additional Conditions for RNOR vs. ROR

Once classified as a Resident, an individual is further categorized as:

Category	Condition
Resident & Ordinarily Resident (ROR)	Resident in India for 2 out of 10 previous years + Stay of 729 days or more in the last 7 years
Resident but Not Ordinarily Resident (RNOR)	Resident for less than 2 out of 10 years or Stay of 729 days or less in the last 7 years

 

📌 Why is RNOR Important?
RNORs enjoy NRI-like benefits because foreign income is not taxable unless earned from Indian sources.