Home / Blog / NRI residential status under income…
NRI · FEMANRI residential status under income tax and FEMA: key differences
You can be a non-resident under FEMA but a resident under income tax in the same year – and the consequences differ. Here is how each law tests residence, the 120-day and deemed-resident rules, RNOR status and worked examples.
Residential status decides what is taxed in India (income tax) and what you can do with money and property (FEMA). The two laws use different tests, so the same person can have different statuses under each.
Income-tax test (Section 6 of both Acts)
Step 1 – Resident or non-resident? An individual is resident in a year if:
- (a) in India for 182 days or more, or
- (b) in India for 60 days or more in the year and 365 days or more in the 4 preceding years.
Exceptions to (b): - Indian citizen leaving India for employment or as crew – only (a) applies. - Indian citizen or PIO visiting India – 60 days is replaced by 182 days, or 120 days if Indian income (excluding foreign sources) exceeds ₹15 lakh.
Deemed resident: an Indian citizen with Indian income above ₹15 lakh who is not liable to tax in any other country by reason of domicile or residence – treated as RNOR.
Step 2 – ROR or RNOR? A resident is RNOR if: - non-resident in 9 out of 10 preceding years, or - in India for 729 days or less in the 7 preceding years, or - resident only because of the 120-day rule, or a deemed resident.
Tax consequences
| Status | Indian income | Foreign income |
|---|---|---|
| Resident and ordinarily resident (ROR) | Taxed | Taxed (global income) |
| RNOR | Taxed | Taxed only if from a business controlled or profession set up in India |
| Non-resident | Taxed | Not taxed |
FEMA test
Under Section 2(v) of FEMA, a person resident in India is one who stayed in India for more than 182 days in the preceding financial year, but excluding a person who has gone out or stays outside India for employment, business or any purpose indicating intention to stay outside for an uncertain period. A person coming to India for employment, business or with intention to stay for an uncertain period is resident from arrival.
Practical effect: an Indian taking a job in Dubai becomes non-resident under FEMA on departure and must convert savings accounts to NRO, while for income tax the status is determined at year-end by days.
Worked examples
| Person | Facts (FY 2025-26) | Income tax | FEMA |
|---|---|---|---|
| Amit, moved to Canada for a job on 1 August 2025 | In India 122 days in FY | Non-resident (citizen leaving for employment – 182-day test only) | Non-resident from 1 August 2025 |
| Neha, NRI in the US, visits for 130 days, Indian rental and interest income ₹18 lakh | 130 days; 400 days in last 4 years | Resident (120-day rule) – RNOR | Non-resident |
| Rohit, in Dubai (no income tax), Indian income ₹20 lakh, visits 40 days | 40 days | Deemed resident – RNOR | Non-resident |
| Sunita, returns permanently in June 2025 after 12 years in the UK | 290 days | Resident – RNOR (non-resident in 9 of 10 years) | Resident from return |
| Student going to Australia in July 2025 | 105 days | Non-resident if not meeting tests | Non-resident (studies abroad; RBI treats students as NRI) |
Why this matters in practice
- ITR form: NRIs and RNORs cannot use ITR-1.
- Bank accounts: on becoming FEMA non-resident, savings accounts must be redesignated as NRO; NRE/FCNR accounts can be opened.
- TDS: payments to non-residents attract TDS under Section 195 (Section 393(2)) at higher rates.
- Investments: some investments (e.g. PPF extension, small savings) are restricted for NRIs.
- Returning NRIs: RNOR status for 2–3 years can shelter foreign income – plan the return date.
- Schedule FA: RORs must report foreign assets; RNORs and NRs need not.
Counting days
- Day of arrival and day of departure are generally both counted as days in India.
- Keep passport stamps, boarding passes and travel history (e-filing/immigration records).
Common mistakes
- Assuming FEMA and income-tax status are the same.
- Missing the 120-day rule for NRIs with high Indian income.
- Not redesignating savings accounts after moving abroad.
- Claiming non-resident status without travel evidence.
Key takeaway
Income tax counts days (with 120-day and deemed-resident rules); FEMA looks at the preceding year and intention. Determine both every year, especially in years of moving out or returning. Our NRI services team advises on residential status, returns and bank accounts.
Official references
Provisions discussed (summaries in our Law Library):
- Income-tax Act, 2025 – Section 6 (corresponds to 6): Residence in India
- Income-tax Act, 1961 – Section 6 (corresponds to 6): Residence in India
- FEMA, 1999 & rules – Section 2(v) / 2(w): Person resident / outside India
Official sources to verify the current text, notifications and circulars:
Frequently asked questions
What is the basic test for resident under income tax?
An individual is resident if in India for 182 days or more in the year, or 60 days or more in the year and 365 days or more in the preceding four years. For Indian citizens and PIOs visiting India, 60 days is replaced by 182 days, or by 120 days if Indian income exceeds ₹15 lakh.
Who is a deemed resident?
An Indian citizen with total Indian income above ₹15 lakh who is not liable to tax in any other country because of domicile or residence. Deemed residents are treated as RNOR.
How is FEMA residence different?
Under FEMA, a person is resident if he stayed in India for more than 182 days in the preceding financial year, unless he left or stayed outside India for employment, business or other purpose indicating intention to stay outside for an uncertain period. Intention matters, not just days.
What is RNOR and why does it matter?
Resident but Not Ordinarily Resident – a resident who was non-resident in 9 of the preceding 10 years, or in India for 729 days or less in the preceding 7 years (and certain 120-day/deemed cases). RNORs are taxed in India only on Indian income and income from a business controlled in India, not on other foreign income.
Are days in India counted including arrival and departure?
Generally both the day of arrival and departure are counted as days in India, following judicial guidance; keep travel records.
Does an NRI need to file a return in India?
Yes, if Indian income exceeds the basic exemption limit, or to claim a refund of excess TDS.
Can RNOR status apply for several years after return?
Yes, typically for two to three years depending on past stay; plan foreign income accordingly.
This article is general information on the law as on 10 November 2026, written for educational purposes. It is not professional advice for your case. Section numbers under the Income-tax Act, 2025 should be confirmed with the official section mapping on the Income Tax Department website before use in filings.
Have a tax, GST or business question?
Call, WhatsApp or email CA Dilbagh Singh and team, from Delhi, anywhere in India or abroad.