India introduces new thresholds and carve-outs for non-resident tax status from April 2026

India’s updated tax residency criteria, effective from April 2026, clarify non-resident status based on days spent in the country, with specific exemptions for certain categories and transitional rules for returnees, shaping how global income is taxed.

For Indian tax purposes, non-resident status has nothing to do with citizenship and everything to do with time spent in the country. Under the Income Tax Act, 2025, an individual is generally treated as a resident if they are in India for 182 days or more in a tax year, or for 60 days or more in that year and at least 365 days in the four preceding years. If neither test is met, the person is classified as a non-resident. The rules took effect from April 1, 2026, and continue to determine how much income India can tax. According to the Income Tax Department, residency is central because residents are taxed on worldwide income, while non-residents are taxed only on India-sourced income.

There are important carve-outs to the 60-day test. Indian citizens leaving the country for employment, or as crew on an Indian ship, are exempt from that shorter threshold. For Indian citizens and persons of Indian origin visiting India, the 60-day rule is generally extended to 182 days. But for visitors whose Indian income exceeds ₹15 lakh, excluding foreign income, the limit falls to 120 days. The Income Tax Act, 2025 also carried forward a deemed residency rule for some Indian citizens who are not liable to tax in any other country and whose Indian income exceeds ₹15 lakh. That provision is aimed at people in zero-tax jurisdictions such as the UAE, Bahrain and Qatar.

For returning Indians, the middle category of resident but not ordinarily resident, or RNOR, remains important. As explained by tax guidance and the Income Tax Department, this transitional status applies where a person has been non-resident in 9 of the previous 10 tax years, or has spent 729 days or less in India during the previous 7 years. In practice, RNOR often lasts 2 to 3 years after a return to India. During that period, foreign income is usually not taxable in India, which gives returnees time to reorganise their financial affairs before becoming fully taxable on global income.

For non-residents, Indian tax is generally confined to income that arises in India, including salary for services performed in the country, rent from property in India and capital gains on Indian assets. Tax is usually collected through tax deducted at source, or TDS, which can be higher in cross-border transactions such as property sales and rental payments. Non-residents are taxed at the same slab rates as residents, but they cannot claim the Section 87A rebate. The broader message, reflected in multiple tax guidance sources, is that residential status is not a label but a tax boundary: it decides what India can tax, what remains outside its reach and how smoothly returning or visiting taxpayers can manage the transition.