NRI Tax Residency in India: Rules You Should Know in 2025
With the Indian tax system becoming more structured for global citizens, understanding your tax residency status as a Non-Resident Indian (NRI) is crucial in 2025. The Income Tax Act, 1961, governs how NRIs are taxed in India, and any misstep in residency status could lead to serious financial consequences.
This guide, presented by Vizzve Finance, simplifies everything you need to know about NRI tax residency rules in 2025 to help you stay compliant and financially savvy.
Who is an NRI?
An NRI (Non-Resident Indian) is an individual who is a citizen of India or of Indian origin and resides outside India for employment, business, or other purposes, indicating an intention to stay abroad indefinitely.
NRI Tax Residency Rules for FY 2024-25
Your tax residency in India is determined by your physical stay in the country during a financial year. Here are the updated rules:
1. Basic Stay Rule (60/365 Days):
You are considered a resident if:
You are in India for 182 days or more in a financial year OR
You are in India for 60 days or more in a financial year AND have stayed in India for 365 days or more in the last 4 years.
Exception: For Indian citizens or persons of Indian origin coming on a visit, the 60-day condition is extended to 120 days if their total Indian income exceeds ₹15 lakh.
2. Deemed Resident Rule (New Rule from FY 2020-21 onwards):
If:
You are an Indian citizen and not liable to tax in any other country AND
Your total Indian income exceeds ₹15 lakh,
then you will be considered a deemed resident and taxed accordingly.
3. RNOR (Resident but Not Ordinarily Resident):
You are classified as RNOR if:
You have been a non-resident in 9 out of the previous 10 years or
You have stayed in India for 729 days or less in the previous 7 years.
RNORs enjoy limited tax liability compared to ordinary residents.
Tax Implications for NRIs
Income Earned Abroad: Not taxable in India (if you’re an NRI or RNOR).
Income from India: Taxable (e.g., interest from NRO accounts, rent from property, capital gains).
Double Taxation Avoidance Agreement (DTAA): India has DTAA treaties with over 90 countries to avoid being taxed twice.
Documentation Tips for NRIs
Maintain passport copies and visa/residence permits as proof of travel.
Keep records of entry and exit dates.
Ensure your NRI bank accounts (NRE/NRO) are correctly classified.
File IT returns in India if your income exceeds the basic exemption limit or if you want to claim tax refunds.
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Conclusion
Tax residency is not just about where you live; it's about how long you stay and where your income flows. In 2025, with evolving tax rules, it is essential for NRIs to stay updated and plan their financial movements strategically. Vizzve Finance recommends keeping a detailed travel log and consulting a tax expert to avoid surprises.
Frequently Asked Questions (FAQs)
Q1. Can I be a resident in two countries for tax purposes?
Yes, it's possible. However, the DTAA helps resolve such dual residency issues based on tie-breaker rules.
Q2. What if I exceed 182 days in India—am I taxed on global income?
Yes. If you exceed 182 days, you are considered a resident, and your global income becomes taxable in India unless you qualify as RNOR.
Q3. Is income from abroad taxable in India for NRIs?
No. Foreign income is not taxable in India for NRIs and RNORs.
Q4. Do I need to file an ITR in India as an NRI?
Yes, if your Indian income exceeds ₹2.5 lakh, or if you want to claim a refund or carry forward losses.
Q5. How does the 120-day rule affect NRIs?
If you’re a citizen of India or PIO visiting India and have Indian income above ₹15 lakh, staying 120 days or more may classify you as a resident.
Published on : 28th July
Published by : Selvi
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