Ravi, an Indian software engineer working in Dubai, was planning a short trip to India to visit his family. As the financial year was ending, he casually mentioned to a friend that he needed to file his Income Tax Return (ITR) in India. His friend asked, “Ravi, do you know your residential status for tax purposes?” Confused, Ravi replied, “I live abroad, so I’m obviously an NRI, right?” But that’s where most NRIs make their first mistake.
In India, your residential status for tax purposes doesn’t depend on your citizenship or where you live—it depends on how many days you’ve stayed in India during the year. This one factor can decide whether only your Indian income is taxed or your entire global income becomes taxable. Many NRIs like Ravi often don’t realise that spending a few extra days in India can change their tax status and increase their tax liability.
In this blog, we’ll walk you through the most important rules that NRIs should know before filing their income tax return in India. From determining your residential status to choosing the right ITR form and understanding applicable tax slabs, this guide will simplify everything you need to file correctly and avoid unnecessary tax.
1. Why Residential Status Comes First
Your taxability flows from where you live in the eyes of law, not where you hold a passport.
- Residents pay tax on global income.
- NRIs pay tax only on income that is earned, accrued or received in India.
- RNORs fall in between: they pay Indian income plus foreign income sourced from a business or profession controlled in India.
2. The Statutory Test: Section 6, Income‑tax Act 1961
An individual becomes Resident for a financial year (FY) if any one of these two conditions is met:
- Stayed in India 182 days or more during that FY, or
- Stayed in India 60 days or more in that FY and365 days or more in the four FYs immediately preceding it.
Fail both tests and you are a Non‑Resident for that year.
3. Special Relaxations for Indian Citizens & PIOs
- Visitors: An Indian citizen or Person of Indian Origin (PIO) on a visit can stay up to 182 days without triggering residency.
- Seafarers & Expats: Indian citizens leaving India as crew members of a ship, or for overseas employment, get the same 182‑day cushion.
4. Finance Act 2020: Two Game‑Changing Amendments
4.1 120‑day Rule for High Earners
If an Indian citizen/PIO visits India and his Indian income (excluding foreign‑source income) exceeds ₹15 lakh in that FY, the relaxation shrinks to 120 days.
4.2 Deemed Residency – Section 6(1A)
An Indian citizen with Indian income above ₹15 lakh who is not liable to tax in any other country is automatically Resident but Not Ordinarily Resident (RNOR).
5. ITR Forms Every NRI Must Know
| Scenario | Correct Return |
| No business/profession income | ITR‑2 |
| Business or professional income | ITR‑3 |
| Presumptive taxation (44AD/ADA/AE) | ITR‑4 (NRIs cannot use) |
Typical ITR‑2 income heads
- Rent from Indian property
- Interest on NRO or FCNR deposits
- Capital gains on securities or real estate
- Dividends from Indian companies
6. Key Documents & Statements
| Form | Why It Matters |
| Form 12BB | Evidence for HRA, LTA, Section 80C etc. |
| Form 16 / 16A | Salary or other TDS already paid |
| Form 26AS & AIS | Consolidated tax credits, SFT transactions |
| Form 10E | Relief u/s 89 for salary arrears |
Cross‑verify every TDS entry in AIS before you file, mismatches delay refunds.
7. Choosing Between Old & New Tax Regimes
Since New Regime (Section 115BAC) is the default. You may still opt for the Old Regime and claim deductions.
- Salaried / non‑business taxpayers choose inside the ITR each year.
- Business / profession taxpayers use Form 10‑IEA; switching back is allowed only once.
8. Old Regime Slab Rates for NRIs (AY 2025‑26)
| Income Slab (₹) | Tax Rate |
| Up to 2,50,000 | Nil |
| 2,50,001 – 5,00,000 | 5 % on amount above 2,50,000 |
| 5,00,001 – 10,00,000 | 12,500 + 20 % on amount above 5,00,000 |
| Above 10,00,000 | 1,12,500 + 30 % on amount above 10,00,000 |
Surcharge:
- 10 % > ₹50 lakh ≤ ₹1 crore
- 15 % ₹1–2 crore
- 25 % ₹2–5 crore
- 37 % > ₹5 crore
Enhanced surcharge on equity gains and dividends is capped at 15 %.
Cess: Education & Health cess @ 4 % on (tax + surcharge).
8A. New Regime Slab Snapshot (Optional Route)
| Income (₹) | Tax Rate |
| Up to 3,00,000 | Nil |
| 3,00,001 – 6,00,000 | 5 % |
| 6,00,001 – 9,00,000 | 10 % |
| 9,00,001 – 12,00,000 | 15 % |
| 12,00,001 – 15,00,000 | 20 % |
| Above 15,00,000 | 30 % |
9. Day‑Count Examples You Can Relate To
- Example 1 – Tech professional
A PIO working in Canada visits India for 130 days in FY 2024‑25 and has ₹18 lakh Indian income. Because stay ≥ 120 days and income > ₹15 lakh, she becomes Resident (RNOR) despite the trip being “just four months”. - Example 2 – Gulf expatriate
An Indian citizen based in Dubai earns ₹12 lakh from Indian property and spends 170 days in India. Income < ₹15 lakh, so the older 182‑day visitor limit applies, status remains NRI.
Final Words
Filing income tax as a Non-Resident Indian (NRI) may seem confusing at first, but understanding a few key rules can make the entire process easier and error-free. The most important step before filing your return is checking your residential status under Indian tax law. Your tax liability depends on this status. While residents are taxed on their global income, NRIs are taxed only on income earned or received in India. RNORs fall somewhere in between and have limited tax exposure.
Make sure you carefully calculate the number of days you stayed in India during the financial year. Even a small extension in your stay may change your status from NRI to RNOR or Resident. Also, new rules apply if your Indian income exceeds ₹15 lakh and you are not paying tax in any other country,you may be treated as Resident (RNOR) under the deemed residency clause.
Choosing the correct ITR form, verifying your TDS details from Form 26AS and AIS, and deciding between the Old and New Tax Regime are essential steps to avoid errors or notices from the tax department. Each year, many NRIs face delays in refunds or penalties simply because of incorrect form selection, unmatched TDS data, or wrong residential classification.
