How does an NRI decide residential status?

What decides NRI status?

Residential status decides everything else, so it is the first thing to fix. Under section 6 of the Income-tax Act, status is a question of days spent in India in the financial year, not of citizenship or where you hold a passport. A person can be an Indian citizen and a non-resident, or a foreign citizen and a resident.

Once status is set, the scope of what India can tax follows from section 5. A resident is taxed on worldwide income; a non-resident is taxed only on Indian income. So the day count is not a formality, it sets the size of the tax net.

How do the day-count tests work?

There are two tests, and meeting either makes you a resident for the year. The first is presence in India for 182 days or more in the financial year. The second is presence for 60 days or more in the year and 365 days or more in the four preceding years taken together.

The 60-day limb is relaxed for a citizen who leaves India for employment during the year and for a citizen or person of Indian origin visiting India, so a short trip home does not make a genuine NRI resident by accident. Check the exact relaxed period in the current section text for your facts.

What income is taxed for an NRI?

A non-resident is taxed only on income that accrues or arises in India, is deemed to do so, or is received in India. Foreign income earned and received abroad stays outside the Indian charge. This is the core difference from a resident, who is taxed on global income.

Section 9 then deems some income to be Indian even when it is paid abroad: income from a business connection in India, income from an asset or property in India, capital gains on Indian assets, and salary for services rendered in India. So an NRI who sells an Indian flat or earns rent here is taxable on that, wherever the money lands.

Which ITR form does an NRI file?

An NRI cannot use ITR-1. For income from salary, house property, capital gains, or other sources without any business, the form is ITR-2. Where there is business or professional income, it is ITR-3. Picking the form is really about whether there is business income, once ITR-1 is off the table.

For the resident-side comparison of the same choice, see our which ITR form guide. The NRI point is narrow: no ITR-1, and usually ITR-2.

How does a tax treaty change it?

A Double Taxation Avoidance Agreement between India and your country of residence can override the domestic charge where it is more beneficial. The treaty can assign the right to tax a class of income to one country and cap the rate on things like interest, dividends, and royalties.

To claim a treaty benefit you generally need a Tax Residency Certificate from the other country and Form 10F filed on the portal. Without those, the department applies the domestic rate, so the paperwork is what turns the treaty position into an actual lower tax.

How do I confirm my status?

1. Count your days in India for the financial year against the 182-day test in section 6.
2. If under 182, apply the 60-day plus 365-day test across the four preceding years.
3. Check whether the relaxed 60-day period applies because you left for employment or are a visiting citizen or person of Indian origin.
4. List your Indian-source and deemed-Indian income under sections 5 and 9; ignore genuine foreign income if you are a non-resident.
5. Where a treaty helps, get the Tax Residency Certificate and file Form 10F before claiming it.

Where do NRI returns go wrong?

• Assuming citizenship, not day count, decides residential status.
• Trying to file ITR-1, which a non-resident cannot use.
• Offering foreign salary to Indian tax when the person is a non-resident.
• Missing capital gains on an Indian property sale deemed Indian under section 9.
• Claiming a treaty rate without a Tax Residency Certificate and Form 10F.

Where are these rules published?

The residence test sits in section 6, the scope of income in section 5, and the deeming rules in section 9 of the Income-tax Act, with treaty procedure and forms set out on the income tax e-filing portal. For the foreign-remittance certificate side, read our Form 15CA and 15CB guide. Complied AI keeps CBDT / Income Tax updates in one feed so you can open the notification behind a change to the residence or source rules.