For Non-Resident Indians, the most consequential — and most frequently miscalculated — question in tax planning isn't a rate or a deduction; it's residential status itself. Getting this wrong changes what income India can tax at all, which makes it the starting point for every other NRI tax decision, not a formality to confirm after the fact.
Determining Residential Status
An individual is a resident in India for a financial year if they satisfy either of these conditions:
- Present in India for 182 days or more during the financial year, or
- Present in India for 60 days or more during the financial year AND 365 days or more during the preceding four financial years
Key exceptions that matter for NRIs:
- For an Indian citizen or a Person of Indian Origin visiting India, the 60-day condition is relaxed to 120 days if their total income (other than foreign-sourced income) exceeds ₹15 lakh in the financial year, and to 182 days if it doesn't exceed that threshold.
- A special 'deemed resident' provision applies to Indian citizens with total Indian income exceeding ₹15 lakh who are not liable to tax in any other country — this was specifically introduced to address individuals structuring their affairs to avoid tax residency anywhere.
Resident but Not Ordinarily Resident (RNOR) status — a genuinely useful transitional category for returning NRIs — applies if the individual has been a non-resident in India in 9 out of the 10 preceding years, or has been in India for 729 days or less during the preceding 7 years. RNOR status means foreign income (other than from a business controlled from India) generally isn't taxed in India, giving returning NRIs a multi-year window to reorganize foreign assets before full resident taxation applies.
What Gets Taxed for NRIs
Regardless of residential status, income that is received, accrued, or arising in India is taxable for an NRI — this includes:
- Salary for services rendered in India, even if received abroad
- Income from property situated in India (rental income, capital gains on sale of Indian real estate)
- Interest on Indian bank deposits (NRO accounts, in particular, are subject to tax at source at rates that often surprise NRIs used to NRE account tax-free treatment)
- Capital gains on sale of Indian securities, mutual funds, and other Indian-situated assets
- Business income from a business connection in India
Foreign income is not taxable in India for a genuine non-resident — the confusion here usually arises when an individual's status shifts (due to an extended visit or a change in Indian-income levels triggering the 120-day rule) without them realizing the residency threshold has moved for that year.
DTAA Relief
Where income is potentially taxable both in India and in the NRI's country of residence, India's Double Taxation Avoidance Agreements (DTAAs) with over 90 countries provide relief through either:
- Exemption method — income taxed in one country is exempt in the other, or
- Tax credit method — tax paid in one country is allowed as a credit against tax payable in the other on the same income
To claim DTAA benefit, the NRI typically needs a Tax Residency Certificate (TRC) from their country of residence, along with Form 10F and other prescribed self-declarations — a documentation requirement that's frequently underestimated in terms of lead time, since obtaining a TRC from some foreign tax authorities can take weeks, and this needs to be planned for well before the Indian return filing deadline, not requested at the last minute.
Repatriation Planning
NRIs holding funds in India (rental income accumulated in an NRO account, sale proceeds from Indian property, inherited assets) need to navigate specific repatriation limits and procedural requirements:
- NRO account repatriation is capped at USD 1 million per financial year (inclusive of all capital account transactions), and requires a Chartered Accountant's certificate in Form 15CB, along with the remitter's own declaration in Form 15CA, before the bank will process the outward remittance.
- Sale proceeds from inherited property need to be traced back to how the property was acquired and by whom, since the repatriation rules and applicable tax treatment can differ depending on whether the property was acquired by the NRI themselves, inherited, or gifted.
- NRE account funds are freely repatriable without the same USD 1 million cap or Form 15CB requirement, which is why NRIs are generally well advised to route eligible foreign remittances into NRE rather than NRO accounts wherever the source of funds permits it.
Practical NRI Tax Planning Checklist
- Reassess residential status every year, specifically checking days spent in India against the current thresholds — don't assume last year's NRI status carries forward automatically, particularly with the 120-day rule catching more people as Indian income levels rise
- Maintain a day-count record (travel dates, boarding passes) as contemporaneous evidence of days spent in India, since this is exactly what gets scrutinized in a residency dispute
- Obtain the Tax Residency Certificate early in the year the DTAA benefit will be claimed, not at return-filing time
- Plan Form 15CA/15CB documentation before initiating a large repatriation, since banks won't process the remittance without it and last-minute preparation causes real delays
- Route income appropriately between NRE and NRO accounts based on source, to optimize repatriation flexibility from the outset rather than needing to reclassify funds later
NRI taxation sits precisely at the intersection of residency law, DTAA treaty interpretation, and FEMA repatriation rules — three separate frameworks that all need to be read together for any specific transaction, which is exactly the kind of coordinated planning that HNI accounts and tax management and tax advisory and compliance support is built around, rather than a single rule an NRI can apply from memory year to year.
Perfect Accounting supports NRIs with residential status assessment, DTAA relief claims, and Form 15CA/15CB documentation for repatriation of Indian funds.