Change in Residential Status: Resident to NRI

Why Residential Status Matters

In India, residents are taxed on their worldwide income, while non-residents are taxed only on income arising or received in India. Your status is decided separately for each financial year based mainly on the number of days you are physically present in India.

The Income-tax Act, 2025, effective from April 2026, renumbers these provisions, but the day-count tests remain the same.

How Residential Status is Decided (Broad Overview)

You are generally a resident in a year if:

• You are in India for 182 days or more in that year, or
• You are in India for 60 days or more in that year and 365 days or more in the four preceding years

Important relaxations and exceptions

• An Indian citizen leaving India for employment abroad is tested only on the 182-day condition for that year.
• An Indian citizen or person of Indian origin visiting India is also generally tested on 182 days, but this reduces to 120 days if Indian income (excluding foreign income) exceeds ₹15 lakh.
• An Indian citizen with Indian income above ₹15 lakh who is not liable to tax in any other country may be treated as a deemed resident.
• Returning NRIs may qualify as Resident but Not Ordinarily Resident (RNOR) for some years, under which most foreign income stays outside Indian tax.

The exact result depends on travel dates, so we always count days from your passport and travel records.

The Year You Leave India

The year of departure is the most common source of mistakes. If you were in India for 182 days or more before leaving, you may still be a resident for that whole year, and your foreign salary for the rest of that year may be taxable in India, with relief under the tax treaty (DTAA) where available.

Practical Checklist When You Become an NRI

Bank accounts

• Inform your banks and convert resident savings accounts to NRO accounts
• Open an NRE account for money you bring from abroad (interest on NRE deposits is generally tax-free for NRIs)
• Update KYC and contact details

Investments

• Shares and demat accounts need to be converted to NRI status as per bank and broker rules
• Update residential status with mutual fund houses (FATCA/KYC)
• PPF: existing accounts can generally continue till maturity under prevailing rules; check before making changes
• Review insurance policies and nominations

Property

• Rent from Indian property remains taxable in India; tenants may need to deduct TDS on rent paid to you
• Sale of property involves TDS and capital gains. See NRI Property Sale Tax.

Income tax return

• Choose the correct status in your ITR every year
• NRIs file mostly in ITR-2. See NRI ITR Filing.

FEMA vs Income Tax Status

Your status under FEMA (for bank accounts and investments) and under the Income-tax law (for tax) are decided by different rules. Under FEMA, a person leaving India for employment abroad is generally treated as a non-resident from the time of leaving, while for income tax the full-year day count applies. This is why bank status and tax status can differ in the year you leave.

Documents Required

• Passport with travel stamps, or travel history
• Overseas employment letter or visa details
• List of Indian bank accounts, deposits and investments
• Details of Indian income, such as rent, interest and capital gains
• Previous years' ITRs

Common Mistakes to Avoid

• Declaring NRI status in the year of leaving without checking the 182-day count
• Continuing resident savings accounts after becoming an NRI
• Not informing mutual funds and brokers about the change in status
• Missing DTAA relief, leading to double taxation
• Ignoring RNOR benefits when returning to India

Frequently Asked Questions

When do I become an NRI for income tax?

It depends on days spent in India in each financial year. In the year you leave for employment, you are generally non-resident only if you stayed in India for less than 182 days in that year.

Do I have to close my Indian savings account?

Resident savings accounts should be redesignated as NRO accounts once you become a non-resident under FEMA. Your bank will guide you on the process.

I am returning to India. Will my foreign income be taxed immediately?

Not always. You may qualify as RNOR for a few years, during which most foreign income is generally not taxed in India.

Related Services

• NRI ITR Filing in India
• NRI Property Sale and Capital Gains Tax
• Form 15CA/15CB and NRI Repatriation
• International Business Setup

This page gives general information for guidance only. Laws, forms, fees and timelines change from time to time and depend on individual facts, so please confirm the current position before acting. See all our service guides.

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