182 Days Tax Rule in India for NRIs

NRIs are individuals with Indian family roots who live outside India for more than half of the previous year and plan to remain abroad for an indefinite period due to education, employment, profession, or other reasons. Certain conditions must be met to qualify as an NRI. One of the most commonly discussed conditions is the 182-day rule. But what exactly does this rule mean, and how is the 182-day period calculated for NRIs in India? This article explains the 182-day rule for NRIs and how it is calculated.

Who is an NRI?

In simple terms, a Non-Resident Indian (NRI) is a person who lives in another country while continuing to be an Indian citizen. NRIs are also commonly referred to as Overseas Indians. The Foreign Exchange Management Act, 1999 (FEMA), and the Indian Income Tax Act contain specific provisions for determining NRI status for legal and tax purposes.

Under FEMA, an individual is considered an NRI if they have left India or are residing outside India for purposes such as employment, business activities, vocational pursuits, or other circumstances indicating an intention to stay abroad for an extended period. This status can affect their financial and tax obligations in India, including their eligibility to maintain NRE, NRO, and FCNR accounts and the taxation of income earned in India.

The definition of an NRI under FEMA differs from the definition under the Income Tax Act, which primarily considers the individual’s physical presence in India during a financial year. Therefore, it is important to distinguish between NRI status under FEMA and residential status under the Income Tax Act, as each can have different implications for investments and taxation.

Under the Indian Income Tax Act, an individual’s Non-Resident Indian (NRI) status is determined based on their physical presence in India during a financial year, along with their stay in the preceding years. Let’s understand how this status is determined.

What is the 182 Days Tax Rule in India?

An individual’s residential status in India is determined based on the time spent in the country during the current financial year and the previous 10 financial years. Residential status is determined separately for each year. The following rules and conditions determine whether an individual qualifies as a Non-Resident Indian:

• If an individual stays in India for 182 days or more during the current financial year, they are considered a resident. Similarly, if an individual stays in India for 60 days or more during the relevant financial year and 365 days or more during the preceding 4 years, they will be considered a resident.
• The deemed residency rule applies to Indian citizens earning more than ₹15 lakh annually from Indian sources, excluding foreign income. If such an individual is not subject to tax in any other country due to their domicile or residence, they will be treated as a tax resident.
• The 60-day condition is extended to 182 days for an Indian citizen leaving India for employment abroad. For an Indian citizen or person of Indian origin (PIO) living outside India who visits India, the 60-day threshold is extended to 120 days if their total income, excluding foreign income, exceeds ₹15 lakh. If their income is up to ₹15 lakh, the 60-day condition is extended to 182 days.
• The deemed residency provision and the 120-day rule were introduced subsequently and have been applicable since FY 2020-21.

Note: The New Income Tax Bill has replaced the phrase “for the purpose of employment outside India” with “for employment outside India.” As a result, freelancers, job seekers, professionals, and self-employed individuals will no longer be able to benefit from the relaxed residency provisions.

Benefits Available to NRIs in India

• NRI Quota – Leading educational institutions reserve a specific number of seats for NRIs, OCIs, and PIOs. NRI quota seats are available across various fields, including engineering, law, management, and medicine.
• Government Reservations – The Indian government provides reserved seats for NRIs across various important bodies and institutions.
• Real Estate – NRIs can purchase property in India, subject to compliance with FEMA guidelines.
• Right to Vote – NRIs are entitled to vote in local, state, and national elections.
• Tax Benefits – NRIs can also claim deductions similar to those available to residents. These include life insurance premiums, ULIPs, children’s tuition fees, and investments in ELSS up to ₹1.5 lakh, along with deductions under Sections 80D, 80G, 80TTA, 54EC, and 54.

Why Is It Important to Determine Residential Status?

An individual classified as a Non-Resident (NR) is liable to pay tax on income earned in India, including income that arises or is deemed to arise in India and income received or deemed to be received in India. Different taxation rules apply to different types of income for NRs, including dividend income and gains from the sale of unlisted securities.

Determining residential status correctly is essential for complying with India’s tax regulations. Residents are generally taxed on their worldwide income, including income earned outside India, whereas NRs are taxed only on income generated in India. Therefore, correctly establishing residential status is important to prevent discrepancies and potential tax liabilities.

It is also important to consider tax treaties between India and other countries, as their provisions may override certain Income-tax law provisions relating to residential status and taxation. These treaties can offer relief from potential double taxation. Therefore, consulting tax professionals can help in understanding the impact of tax treaties and residential status.

The Income-tax law also contains provisions for determining the residential status of companies and firms. A company’s residential status depends on its place of incorporation and where its management and control are exercised. In the case of firms, residency is linked to the residential status of their partners.

For individuals, residential status is determined based on their physical presence in India during a financial year and the preceding ten fiscal years. The residency criteria differ depending on whether the individual is an Indian citizen or a person of Indian origin. NRIs are taxed on income sourced from India, with specific rules applying to different types of income. Understanding these criteria and taxation rules is essential for compliance with India’s Income-tax law.

How to Calculate 182 Days for NRI?

To determine the number of days spent in India, you need to count every day you were physically present in the country during the relevant financial year, including both the date of arrival and the date of departure.

For example, if you entered India on July 1, 2023, and left the country on December 31, 2023, your total stay would be 184 days, counting both dates. As a result, you would be considered a Resident Indian for tax purposes.

Determining NRI status can be complex and may depend on several factors. If you find it difficult to establish your residential status while filing your Income Tax Return, you can seek assistance from a tax professional to simplify the process.

Disclaimer

This content is for informational purposes only and reflects provisions of the Income Tax Act as amended up to FY 2025–26. Please consult a Chartered Accountant for professional advice.

Frequently Asked Questions

Q- How can an NRI reduce or avoid tax in India?

NRIs generally cannot avoid tax simply because they live outside India. However, they can legally reduce their Indian tax liability by using applicable deductions, exemptions, DTAA benefits, and tax-efficient investments. Certain types of income, such as eligible interest from NRE and FCNR accounts, may also be exempt from Indian tax subject to the applicable conditions.

Q- How can an NRI avoid TDS in India?

An NRI can apply for a lower or nil TDS certificate by submitting an application in Form 13 to the Income Tax Department. If approved, the certificate may allow the payer to deduct tax at a lower rate or not deduct TDS, depending on the order issued.

Q- Can an NRI stay in India for more than 182 days?

Yes, an NRI can stay in India for more than 182 days, but the stay may affect their residential status for Indian income-tax purposes. Residential status depends on the applicable day-count rules and, in certain cases, additional conditions relating to income and previous years. Therefore, staying beyond 182 days does not always mean the answer can be determined without considering the complete facts.

Q- Which income is not taxable in India for an NRI?

Certain income received by an NRI may be exempt from Indian tax. For example, interest earned on eligible NRE and FCNR accounts is generally exempt subject to the applicable conditions. However, interest from NRO accounts is generally taxable in India.

Q- How long can I maintain NRI status after returning to India?

Returning to India does not automatically mean that you become an ordinarily resident immediately. Depending on your circumstances, you may qualify as a Resident but Not Ordinarily Resident (RNOR) for a certain period after returning. The eligibility depends on your physical stay in India and residential history under the applicable tax provisions.

Q- Is it mandatory for an NRI to file an income tax return in India?

An NRI may need to file an Indian income tax return if their taxable income exceeds the applicable threshold or if specific filing conditions apply. Filing may also be necessary to claim a refund of excess TDS or to report certain types of income and transactions.

Q- Does an NRI have to pay tax on income earned outside India?

The taxability of foreign income depends largely on the individual’s residential status in India. An NRI is generally taxed in India on income that is received, accrued, or deemed to accrue or arise in India, while foreign income may be treated differently depending on the person’s residential status.

Q- Is NRE account interest taxable for an NRI?

Interest earned on an eligible NRE account is generally exempt from Indian income tax while the individual qualifies as a person permitted to hold an NRE account under the applicable rules. The tax treatment should be reviewed if the person’s residential status changes.

Q- Is NRO account interest taxable for an NRI?

Yes. Interest earned on an NRO account is generally taxable in India and may also be subject to TDS. The applicable tax rate and any relief available under a DTAA should be considered while determining the final tax liability.

Q- Can an NRI claim benefits under a DTAA?

Yes. An NRI who is a tax resident of another country may be able to claim benefits under the applicable Double Taxation Avoidance Agreement (DTAA), subject to meeting the treaty conditions and providing the required documentation, such as a valid Tax Residency Certificate.

Q- Can an NRI claim a refund of excess TDS deducted in India?

Yes. If the TDS deducted from an NRI’s Indian income is higher than the actual tax liability, the excess amount may generally be claimed as a refund by filing an income tax return, subject to the applicable filing requirements.

Q- Can an NRI claim a lower TDS rate under a DTAA?

In eligible cases, an NRI may be able to claim a lower tax rate under the applicable DTAA. The benefit depends on the nature of income, treaty provisions, residential status, and required documentation.

Q- What happens to my tax status when I return to India permanently?

Your residential status should be determined separately for each financial year based on the applicable stay and other conditions. After returning to India, you may initially qualify as an RNOR depending on your circumstances before potentially becoming a Resident and Ordinarily Resident (ROR).

Q- Can an NRI invest in India without paying tax?

NRIs can make various investments in India, but the tax treatment depends on the type of investment and income generated. Some investments may provide tax exemptions or deductions, while interest, rental income, dividends, and capital gains may be taxable under applicable provisions.

Q- Can a Chartered Accountant help an NRI with Indian tax compliance?

Yes. A Chartered Accountant can assist NRIs with ITR filing, TDS, Form 13 applications, DTAA benefits, foreign income reporting, capital gains, NRE/NRO taxation, and other Indian tax compliance requirements.

Written by

Asha Ahuja Sethi (Head Admin at Jatin Sethi & Co., Chartered Accountants)