The Income Tax Bill 2025, effective April 1, 2026, introduces significant changes to NRI tax residency rules, especially impacting high-income NRIs and Persons of Indian Origin (PIOs). These amendments redefine how residency status is determined and could considerably affect tax liabilities. Understanding the new framework is crucial for effective tax planning and compliance.
- Current NRI Residency Rules
Under the existing Income Tax Act, 1961, an individual qualifies as an Indian tax resident if either of the following conditions is met:
- Stay in India for 182 days or more in a financial year, or
- Stay in India for 60 days or more during the financial year and at least 365 days in the preceding four years.
For Indian citizens and PIOs, specific relaxations apply:
- If Indian income (excluding foreign income) exceeds ₹15 lakh in a financial year, the 60-day threshold is replaced with 182 days.
- A deemed residency rule under Section 6(1A) states that:
- If an Indian citizen earns ₹15 lakh or more from Indian sources and is not liable to tax in any other country, they may be considered a resident for tax purposes.
- Key Changes Under the Income Tax Bill 2025
- a) 120-Day Stay Threshold for High-Income NRIs
From April 1, 2026, the stay duration criteria for NRIs and PIOs with Indian income exceeding ₹15 lakh will change:
- The earlier 60-day limit will increase to 120 days.
- Individuals will be classified as Resident but Not Ordinarily Resident (RNOR) if they:
- Spend 120 days or more in India during a financial year, and
- Have stayed in India for 365 days or more during the previous four years.
This aims to include high-income NRIs who maintain substantial ties with India.
- b) Deemed Residency for “Stateless Indians”
The Bill also targets individuals living in tax-free jurisdictions such as the UAE, Monaco, or Bermuda:
- Indian citizens earning ₹15 lakh or more from Indian sources but not paying tax abroad will be treated as full residents of India.
- This rule applies even if they don’t spend any time in India during the year.
The change seeks to curb tax avoidance by residents of low-tax or zero-tax countries.
- Tax Implications for NRIs and PIOs
| Residency Status | Criteria | Tax Treatment |
| Non-Resident (NRI) | Stay less than 120 days (and <182 days) and less than 365 days in the previous four years | Taxed only on Indian income |
| RNOR | Stay 120–182 days + Indian income ₹15 lakh+ | Taxed only on Indian income; foreign income exempt |
| Resident (Ordinary) | Stay ≥182 days or falls under deemed residency | Taxed on global income, including foreign earnings |
Key Insights
- RNOR status continues to offer relief since foreign income remains untaxed in India.
- However, deemed residents face global income taxation, which can significantly increase tax liabilities.
- How NRIs Should Prepare for the New Rules
- Track Your Stay in India
Keep a close watch on the number of days spent in India to avoid unintentionally exceeding the 120-day limit. - Review Your Income Structure
NRIs earning ₹15 lakh or more from Indian sources should analyze whether they may qualify as RNOR or full residents under the revised provisions. - Optimize Tax Planning
Use RNOR status strategically to manage investments, remittances, and overseas income, reducing exposure to global taxation. - Consult a Tax Expert
Given the complexity of these changes, professional advice can help ensure compliance and effective tax optimization.
- Key Takeaways
- From April 1, 2026, NRIs with ₹15 lakh+ Indian income will be considered RNOR if they stay in India for 120 days or more, replacing the current 60-day rule.
- Indian citizens earning ₹15 lakh+ in India but not taxed abroad will be treated as full residents, even without staying in India.
- Early and proactive tax planning is essential to manage residency status and minimize exposure to global income taxation.
Conclusion
The revised NRI tax residency rules, effective April 1, 2026, represent a significant shift in determining tax residency for high-income NRIs and PIOs. With the 120-day stay limit and the deemed residency provision, individuals earning substantial income from Indian sources could be classified as RNOR or even full residents, potentially making their global income taxable in India. Timely planning and expert consultation will be critical for managing tax exposure and ensuring compliance.
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Disclaimer: Aim of this article is to give basic knowledge about the topic to people who are not in touch with Indian tax norms. When anybody is dealing with these kinds of cases practically, he shall consider all relevant provisions of all applicable Laws like FEMA/Income Tax/RBI /Companies Act etc.