A Non-Resident Indian is someone who lives outside India and, during a given Indian financial year (April 1 to March 31), does not spend enough days inside the country to be treated as a resident under Indian law. Two statutes decide the label: the Foreign Exchange Management Act (FEMA) of 1999, which looks at why you are abroad, and the Income Tax Act of 1961, which counts the days you were physically present in India. The classification matters because it controls how India taxes you, which bank accounts you are allowed to hold, and what kind of property you can buy.
The Two Legal Definitions
FEMA defines a “person resident outside India” as someone who has left India, or stays outside India, for employment, business, a professional vocation, or any other circumstance that suggests an intention to remain abroad for an indefinite period. The emphasis is on purpose and intent. If you have relocated for work or business without a fixed return date, FEMA treats you as a non-resident for foreign-exchange purposes, which is what governs your bank accounts, remittances, and investments inside India.
The Income Tax Act takes a different route. It does not care why you left. It counts how many days you were physically inside India during the financial year, and your day count decides whether you are a resident, a non-resident, or a middle category called Resident but Not Ordinarily Resident.1Income Tax Department. Non-Resident Individual for AY 2025-26 That classification then decides which of your income India can tax.
The two definitions usually line up, but not always. Someone who has clearly moved abroad for a job may still trip an Income Tax Act residency test in a year with heavy India travel, or the reverse. The practical rule: FEMA governs your money mechanics, the Income Tax Act governs your tax bill, and you need to check both.
The Day-Count Tests That Decide Your Status
You are a resident of India for a financial year if you meet either of these tests:2Indian Kanoon. Section 6 in The Income Tax Act, 1961
- You were physically present in India for 182 days or more during the financial year, or
- You were in India for at least 60 days during the year and at least 365 days in total across the four preceding financial years.
Fail both tests and you are a non-resident for that year. The classification resets every April 1, so your status can shift from one year to the next depending on how you travel.
Exceptions That Protect Working NRIs
Two carve-outs relax the 60-day limb of the second test, and most working NRIs rely on them.
Indian citizens who leave India during the year for employment abroad, or as crew members of an Indian ship, get the 60-day threshold raised to 182 days.2Indian Kanoon. Section 6 in The Income Tax Act, 1961 In effect, both tests collapse into the single 182-day rule, so a long holiday or extended family visit of a few months will not accidentally flip your status.
A separate modification applies to Indian citizens or persons of Indian origin who are visiting India and whose taxable Indian income (excluding foreign-source income) exceeds ₹15 lakh. For them, the 60-day threshold becomes 120 days.1Income Tax Department. Non-Resident Individual for AY 2025-26 If you draw substantial rental or investment income from India and spend more than four months there while also crossing the 365-day lookback, you can slip into resident status earlier than the headline numbers suggest.
Deemed Residency for Indian Citizens Earning From India
Since Assessment Year 2021-22, Section 6(1A) has added a rule that bypasses day counting altogether. If you are an Indian citizen with total Indian-source income above ₹15 lakh (excluding foreign-source income) and you are not liable to pay tax in any other country, India treats you as a tax resident no matter how few days you spent there.1Income Tax Department. Non-Resident Individual for AY 2025-26
The target is a specific profile: Indian citizens based in zero-tax jurisdictions such as the UAE or the Bahamas who draw significant income from India while keeping their India visits short. If you live in a country that imposes income tax, the provision generally does not apply, because you are “liable to pay tax” there even if deductions or credits bring the bill to zero. Anyone with Indian income near the ₹15 lakh line who splits time between India and a low-tax jurisdiction should track this rule carefully.
The RNOR Middle Category
Between full resident and non-resident sits a third status that matters most when an NRI is moving back to India. You are classified as Resident but Not Ordinarily Resident (RNOR) if you meet the day-count test for residency but also satisfy one of these conditions:
- You were a non-resident in at least 9 of the 10 financial years preceding the current year, or
- You spent 729 days or fewer in India during the 7 financial years preceding the current year.
RNOR works as a tax transition period. While you hold the status, India taxes only your Indian-source income, the same scope as a non-resident. Your foreign salary, overseas investment gains, and bank interest earned abroad stay outside India’s reach. For most returning NRIs the window lasts two to three years, which is time to restructure foreign holdings before full resident taxation kicks in. Overlooking RNOR is one of the more expensive planning errors a returning NRI can make.
NRI Is Not the Same as OCI
NRI is a residency classification. Overseas Citizen of India (OCI) is a registration granted to foreign nationals of Indian origin under the Citizenship Act of 1955, which lets them live and work in India without a visa for an indefinite period. OCI cardholders get most of the rights of Indian citizens with two notable exceptions: they cannot vote in Indian elections, and they cannot purchase agricultural land. The older Person of Indian Origin (PIO) scheme was folded into the OCI program in January 2015, so former PIO cardholders are now treated as OCI cardholders.3Ministry of External Affairs, Government of India. FAQ on Overseas Indians (OCIs, PIOs and NRIs)
The two run on separate tracks. You can hold OCI status and simultaneously be an NRI, which just means you are a registered foreign national of Indian origin currently living abroad. You can also be an OCI cardholder who has moved to India and now qualifies as a resident under the day-count rules. OCI identifies who you are by heritage; NRI identifies where you live.
What NRI Status Means in Practice
Once you fall on the non-resident side of the Income Tax Act tests, three things change at once.
Tax Scope Narrows to Indian Income
India taxes only income you earn or receive within India. Salary for work performed in India, rent from Indian property, interest on Indian bank deposits, dividends from Indian companies, and capital gains from the sale of Indian assets all fall within India’s reach.1Income Tax Department. Non-Resident Individual for AY 2025-26 Income earned entirely outside India stays outside it.
Tax Deducted at Source (TDS) applies at higher rates than for residents, with no threshold exemption. Rental income and NRO fixed-deposit interest are withheld at 30% plus cess. Dividends from Indian companies are withheld at 20% plus cess. Long-term capital gains on property held over 24 months face 12.5% plus cess, and short-term gains on property face 30% plus cess. Interest on NRE and FCNR deposits is exempt from Indian tax. The withheld amount often exceeds the actual liability, especially if total Indian income is modest, so filing a return to claim a refund is standard practice.
If you live in a country that taxes worldwide income, the same Indian income could in principle be taxed twice. India has Double Taxation Avoidance Agreements with over 90 countries; where one applies, you can usually claim a foreign tax credit at home for taxes paid in India, by filing Form 10F together with a Tax Residency Certificate from your country of residence. Where no treaty exists, Section 91 of the Income Tax Act gives unilateral relief at the lower of the two tax rates on the doubly taxed income.
Your Indian Bank Accounts Have to Change
Once you become a non-resident, Indian banking rules require regular savings accounts to be converted to NRI-specific types. Three options cover the main uses:
- NRE (Non-Resident External) accounts hold foreign earnings converted to rupees. Principal and interest are fully repatriable, and interest is exempt from Indian income tax.1Income Tax Department. Non-Resident Individual for AY 2025-26
- NRO (Non-Resident Ordinary) accounts hold income earned inside India, such as rent, dividends, and pension payments. Interest is taxable at the TDS rates above. Repatriation of capital funds is capped at USD 1 million per financial year, though current income like rent and dividends can be repatriated after tax without counting toward that cap.
- FCNR (Foreign Currency Non-Resident) accounts are fixed deposits held in foreign currency, which removes exchange-rate risk on the principal. Interest is exempt from Indian tax, and both principal and interest are fully repatriable.
If you later return to India permanently, the NRE and FCNR accounts have to be converted to resident accounts or redesignated as resident foreign-currency accounts.
Property Purchases Have Limits
NRIs can freely buy residential and commercial property in India without any special approval. The restriction is on agricultural land, farmhouses, and plantation property, which cannot be bought directly, though they can be inherited from a resident of India.4Ministry of External Affairs, Government of India. Acquisition and Transfer of Immovable Property in India Inherited agricultural land can only be sold to an Indian citizen who is permanently resident in India.
Repatriation of sale proceeds depends on how the property was paid for. Property bought with rupee funds routes its proceeds through the NRO account, subject to the USD 1 million annual cap.5Reserve Bank of India. Purchase of Immovable Property Property bought with foreign-currency funds routed through an NRE or FCNR account allows repatriation of sale proceeds up to the amount originally brought in for the purchase.4Ministry of External Affairs, Government of India. Acquisition and Transfer of Immovable Property in India A Permanent Account Number (PAN) is mandatory for any property transaction and for most other financial activity in India, including opening bank accounts, investing in securities, and filing tax returns.