Are you an NRI India visitor worried about how your short trips home might affect your tax status? The rules defining who qualifies as a Non-Resident Indian have significant tax implications that you need to understand, especially with the 120-day rule becoming increasingly important.
For those wondering “what is NRI in India” from a tax perspective, the definition of NRI is primarily determined by the number of days you spend in the country. According to Indian law, you’re considered a resident if you stay for 182 days or more during the previous financial year. However, different time limits apply in specific situations. Importantly, if you’re an Indian citizen or Person of Indian Origin with income exceeding ₹15 lakh from Indian sources, the threshold drops to just 120 days. This stricter limit can unexpectedly change your NRI tax in India situation, potentially requiring NRI India tax filing even after relatively brief visits.
In this guide, we’ll explore everything you need to know about NRI definition changes, how to determine your residency status, and what steps to take to remain compliant with the latest NRI tax in India regulations for 2025.
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Who is Considered an NRI in 2025?
Understanding who qualifies as an NRI in 2025 requires navigating through specific legal definitions that determine your tax obligations in India. Let’s clarify this often misunderstood area with the latest rules.
Definition of NRI under Indian law
The definition of NRI fundamentally revolves around the number of days you spend in India. Under the Income Tax Act, you’re considered a non-resident Indian when:
- You stay in India for less than 182 days in a financial year
- For Indian citizens or Persons of Indian Origin visiting India, the threshold extends to 182 days unless your Indian income (excluding foreign sources) exceeds ₹15 lakh – then it drops to 120 days
Additionally, Indian citizens leaving for employment abroad or as ship crew members enjoy special provisions, with their threshold staying at 182 days.
Indian tax law categorizes individuals into three statuses: Resident and Ordinarily Resident (ROR), Resident but Not Ordinarily Resident (RNOR), and Non-Resident (NR). Your status determines which income is taxable in India.
FEMA vs. Income Tax Act criteria
The Foreign Exchange Management Act (FEMA) and Income Tax Act define NRI status differently, creating confusion for many.
Under FEMA, your status hinges on both duration and intention. You’re considered an NRI if:
- You’re an Indian citizen residing outside India for more than 182 days in the preceding financial year
- You leave India with the intention to stay abroad indefinitely for employment, business, or education
Nevertheless, a crucial distinction exists: under Income Tax rules, your status resets every year based on physical presence, whereas FEMA considers your intention to reside abroad.
Common misconceptions about NRI status
Many tax issues stem from misunderstandings about NRI status. First, moving abroad doesn’t automatically make you an NRI – your days in India still count. Moreover, many incorrectly believe their “intention” alone determines residency status under FEMA.
Another prevalent myth is that NRIs have no tax liability in India. In reality, all Indian-source income remains taxable regardless of where you live. Furthermore, if your status changes to resident in a particular year, you must report global income on your Indian tax return.
Your NRI status isn’t fixed – it resets annually based on your India visits. Before making investment decisions or filing returns, verifying your current status is essential.
Breaking Down the 120-Day Rule
The recent changes to India’s tax rules have introduced a significant threshold that many NRIs need to monitor carefully. Let’s examine what this means for your tax status in India.
What is the 120-day rule?
The 120-day rule is a pivotal new tax provision specifically targeting high-income NRIs. Under this rule, if you’re an Indian citizen or Person of Indian Origin visiting India and your Indian-sourced income exceeds ₹15 lakh (excluding foreign income), you’ll be classified as an Indian resident for tax purposes if you stay in India for 120 days or more during the financial year. This rule applies in conjunction with another condition – having stayed in India for 365 days or more during the preceding four years.
Essentially, this rule creates a lower threshold for determining tax residency status for wealthy NRIs with substantial Indian income. Once this threshold is crossed, your status changes from Non-Resident to Resident but Not Ordinarily Resident (RNOR).
How it differs from the 182-day rule
The 120-day rule represents a significant deviation from the standard 182-day rule:
- Income threshold: While the 182-day rule applies universally, the 120-day rule specifically targets individuals earning over ₹15 lakh from Indian sources.
- Stay duration: For most NRIs, the residency threshold remains 182 days – you’re considered non-resident if you stay less than 182 days in India. Yet, for high-income individuals, this threshold shrinks to just 120 days.
- Classification impact: Crossing the 182-day threshold could classify you as a full resident, potentially making your global income taxable in India. Meanwhile, staying between 120-182 days (with ₹15 lakh+ Indian income) classifies you as RNOR.
Impact on high-income NRIs
For affluent NRIs, this rule creates several notable consequences:
First, as demonstrated by a case example, an NRI businessman earning ₹20 lakh from India who visits for 130 days would now be classified as RNOR under the new rule, whereas previously he would have remained an NRI.
Second, although obtaining RNOR status means only your Indian income remains taxable (global income stays exempt), this still represents a significant change for those accustomed to extended India visits.
Finally, this provision effectively reduces the flexibility high-earning NRIs previously enjoyed in planning their stays without triggering tax residency. Consequently, visit planning becomes increasingly critical for those with substantial Indian income.
How the New Rule Affects Your Taxes
The tax implications of India’s 120-day rule create significant financial considerations for non-residents. Let’s explore what this means for your wallet in 2025.
NRI tax in India: What changes in 2025
Tax rules for NRIs have evolved substantially in 2025. Notably, capital gains taxation saw major shifts after July 23, 2024, with short-term capital gains on listed equity now taxed at 20% instead of the previous 15%. Similarly, long-term capital gains on equity investments face a 12.5% tax rate (replacing the earlier 10%) on gains exceeding ₹1.25 lakh annually.
For property transactions, long-term capital gains are now taxed at 12.5% without indexation benefits, though NRIs can choose between this new rate or the older 20% with indexation for properties acquired before July 23, 2024.
When you become a tax resident
Your residency status determines which income is taxable. Upon crossing the 120-day threshold (with Indian income exceeding ₹15 lakh), you transition from NRI to Resident but Not Ordinarily Resident (RNOR). Importantly, as an RNOR, only your Indian-sourced income remains taxable—your global income stays exempt.
If you stay beyond 182 days, you become a full resident, potentially making your worldwide income taxable in India.
NRI India tax filing checklist
For successful tax compliance:
- File using ITR-2 by September 15, 2025, for the assessment year 2024-25
- Provide income proofs from India, TDS certificates, and Form 26AS
- Submit Form 67 if claiming Foreign Tax Credit, along with tax payment proofs from abroad
- Include TRC (Tax Residency Certificate) and Form 10F to claim relief under Double Taxation Avoidance Agreements
- Maintain detailed travel records to verify residency status
Since income tax filing is mandatory for NRIs with Indian income exceeding the basic exemption limit, proper documentation is crucial for avoiding penalties.
Steps to Stay Compliant as an NRI
Staying on the right side of Indian tax regulations requires proactive management of your NRI status. Here’s how to maintain compliance with the latest rules.
Track your days in India accurately
Keeping a precise log of your India visits is now crucial for NRIs. Count both arrival and departure days as complete days in India. For high-income NRIs earning over ₹15 lakh from Indian sources, exceeding 120 days can change your tax status immediately. Hence, maintain passport stamps, boarding passes, and digital calendars as evidence of your travel history.
Plan visits to avoid tax residency
Strategic planning helps preserve your NRI status. Consider these approaches:
- Spread your India trips across different financial years rather than concentrated visits
- If possible, keep Indian-sourced income below the ₹15 lakh threshold to avoid the stricter 120-day rule
- For those with substantial Indian income, plan shorter but more frequent visits
Consult a tax advisor for personalized guidance
Professional guidance is indispensable given the complexity of NRI taxation. A tax expert can help:
- Determine your exact residency status for each financial year
- Leverage Double Taxation Avoidance Agreements that India has with over 75 countries
- Structure your investments and income to minimize tax liability
- Ensure compliance with Foreign Exchange Management Act (FEMA) regulations alongside Income Tax provisions
Conclusion
Understanding the complexities of NRI tax rules remains essential for anyone dividing their time between India and other countries. Navigating your tax obligations depends primarily on accurately tracking your days spent in India and knowing which threshold applies to your situation. The 120-day rule certainly creates additional considerations for high-income NRIs earning over ₹15 lakh from Indian sources.
Your residency status determines which parts of your income face taxation in India. Though many assume NRIs have no tax liability in India, this misconception can lead to compliance issues. All Indian-source income remains taxable regardless of residency status, while global income becomes taxable only upon becoming a full resident.
Proper planning makes all the difference between maintaining NRI status and triggering unwanted tax obligations. Spreading visits across financial years, keeping detailed travel records, and staying aware of income thresholds will help you manage your tax position effectively. Additionally, the changes to capital gains taxation in 2025 require close attention from NRIs with investments in India.
Tax status resets annually based on physical presence, therefore strategic visit planning deserves careful consideration. Most importantly, seeking professional tax advice tailored to your specific circumstances will ensure you meet all compliance requirements while optimizing your tax position. Taking these precautions will allow you to enjoy your time in India without unexpected tax surprises afterward.