How NRI Tax Residency Works in India: Rules You Should Know in 2025

If you're an NRI, figuring out whether you qualify as a tax resident in India can get confusing, especially with the changing rules and income thresholds. The New Income Tax Bill 2025 announced changes to the existing tax residency rules for non-resident Indians (NRIs), Persons of Indian origin (PIOs) and others. Knowing the new tax residency rules is essential to ensure compliance if you fall under these categories. 
In this blog, we’ll discuss NRI taxation in India, its application, and what you need to know before filing your taxes this year.
 

Who Qualifies as a Non-Resident Indian (NRI)?

Each financial year, individuals are required to declare their residential status, as it directly influences their tax obligations. One may qualify as a Non-Resident Indian (NRI) in a particular year and be classified as a resident in another. Therefore, understanding the definition of an NRI is crucial for accurate tax calculations.
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Criteria for Being Considered a Resident (for Tax Purposes)

An individual is classified as a resident in India for tax purposes if they meet either of the following criteria:
 

    Also exempt if you are an NRI or Person of Indian Origin (PIO) visiting India and your Indian income is below ₹15 lakhs in the financial year    Non-Resident Indian (NRI)

What Does This Mean in Practice?

Under the older rules, if an Indian citizen employed abroad returned to India and remained for approximately 70 days during a financial year, they would have been treated as a resident. However, under the new provisions, as the individual is working abroad, the 60-day condition does not apply to them. As a result, they are now regarded as a Non-Resident Indian (NRI).

Not Meeting Either Rule?

If you do not satisfy either the Old Rule or the Modified Rule (including the exceptions), you will be treated as a non-resident.

What Category Do You Fall Under?

Determining your residency status—and how NRI taxation in India applies to you—will depend on:
●    The amount of income earned in India during the financial year, and
●    The duration for which you maintain your NRI status.
Also Read : Confused between Income Tax and TDS? Know the Differences!

New Rule for High-Income NRIs and PIOs

Here is a modification about NRI taxation in India that high-income NRIs and PIOs should know.  
As per this new rule, if you are an NRI or PIO earning an annual income of more than ₹ 15 lakhs in India, you will be classified as an RNOR (Resident but Not Ordinarily Resident), provided you belong to these categories:
●    You have stayed in India for 120 days for the tax year
●    You have stayed in India for 365 days in the last 4 years before the tax year
Earlier, this rule was valid for 60 days, but now, it has been extended to 120 days to be classified as an RNOR. 
Here is an example: If an NRI earns ₹17 lakhs from India and has visited the country for 75 days for that tax year, he is classified as an RNOR for taxation purposes for that year. Per the earlier 60-day rule, he would have been classified as an NRI.

Who is a Not Ordinarily Resident?

If you satisfy one of the following conditions, you will qualify as a NOR:
●    You were an NRI for 9 out of the last 10 years, or
●    You spent 729 days or fewer in India during the previous 7 years, or
●    You're an Indian citizen/PIO who earned ₹15 lakh+ and stayed between 120 and 182 days in India in that financial year

Tax Impact for NORs

According to the NRI tax in India regulations, as an RNOR, you only need to pay tax on:
●    Income earned or received in India
●    Business/professional income controlled from India
Your global income remains exempt, unlike residents who are taxed worldwide.
Also Read : What is Rebate in Income Tax?

New Deemed Residency Rules

Are you an Indian citizen? Is your income earned from India more than ₹ 15 lakhs? Are you living in a tax-free country like the UAE, Saudi Arabia, etc.?
If yes, the Income Tax Bill's new “deemed residency” rules will impact you. According to this rule, you will be considered a resident in the above case, even if you never visited India during that tax year or the years preceding that. As a resident, you should also pay taxes in India for the income you earned in a foreign land.

Clarification for Seafarers (Foreign Ship Crew)

The CBDT’s Circular No. 13/2017 clarifies that crew members on foreign ships should exclude their sea service days when calculating their stay in India. This helps many retain their NRI status despite prolonged offshore assignments.

Other Tax Residency Rules NRIs Should Be Aware Of

●    HUFs, Trusts, and AoPs: These are considered Indian residents if control and operations are entirely based in India.
●    Companies: Even foreign companies can be taxed in India if major decisions (Place of Effective Management) are taken here
●    Partnership Firms: Taxed based on where control and management are located

Tips to Prevent Being Qualified as a Tax Resident in India

Here are a few tips based on the NRI tax residency rules so that you can avoid tax residency in India:
●    Reduce your stay in India to less than 120 days, especially if your income from India is ₹ 15 lakhs or more.
●    Plan your India travel so that it is for a few days, scattered across different tax years.
●    Regulate your income and ensure you pay taxes on time in the foreign country where you are working.
●    Keep your income from India at less than ₹15 lakhs so you don’t fall under the “deemed residency” concept.
●    Invest your income earned from your employment/business prudently in several investment sources to reduce your taxable income.
Also Read :  Guide to e-Filing or Online Filing your Income Tax Returns

Conclusion

Navigating financial responsibilities while relocating to India can be challenging, especially with the recent changes in NRI taxation rules. Whether you're managing sudden expenses, tax liabilities, or simply settling back in, staying financially prepared is crucial. 
Hero FinCorp’s instant personal loan for NRIs offers a hassle-free solution, providing fast, collateral-free funding with flexible repayment options. With support like this, you can focus on your transition with confidence, knowing you’re financially covered every step of the way.

Frequently Asked Questions

Who qualifies as a non-resident Indian under Indian tax law?

Anyone staying in India for less than 182 days in a financial year—or meeting the alternate 60 + 365 rule—is classified as a non-resident Indian.

What is the RNOR status in NRI taxation in India?

An RNOR is taxed only on Indian income or income linked to India. Under this status, global income stays exempt.

Does the new income tax bill change the NRI tax in India?

No, it’s not in effect yet. Existing NRI taxation in India, as ruled by the Income-tax Act of 1961, still applies for FY 2024–25.

How can NRIs avoid being taxed as residents?

Limit your stay to under 120 days if your Indian income exceeds ₹15 lakh and maintain tax residency abroad.

Can NRIs get a personal loan in India?

Yes. Hero FinCorp offers instant personal loans with flexible terms for NRIs to manage relocation or sudden tax payments.

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