Synopsis:
In 2025, the Indian government has introduced clearer definitions and rules for determining Non-Resident Indian (NRI) status for tax purposes. While the 182-day rule continues to be the basic benchmark, new provisions like the 120-day rule for high-income individuals and the ‘deemed resident’ clause for stateless Indians now play a critical role. This blog explains all the rules in simple language, outlines who qualifies as an NRI, and why this status matters for taxation, investments, and compliance.
The term Non-Resident Indian (NRI) is more than just a label—it’s a legal tax classification. Whether you’re working abroad, managing international business, or simply spending more time outside India, your residential status determines how the Income Tax Department of India treats your income.
In 2025, the criteria for determining NRI status have become slightly more complex, especially for high earners and those with no other tax residency. Let’s break down the current rules.
1. The Classic 182-Day Rule (Still Applicable in 2025)
According to Section 6 of the Income Tax Act, 1961, a person is considered an Indian resident if they:
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Stay in India for 182 days or more in a financial year, or
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Stay in India for 60 days in a financial year AND 365 days in the preceding 4 financial years.
If you do not meet the above conditions, you are considered an NRI.
Example: If you are working in the UAE and stayed in India for only 100 days in FY 2024–25, you are considered an NRI under the 182-day rule.
SECTION 6 – Residence in India
(1) An individual is said to be resident in India in any previous year, if he—
(a) is in India in that year for a period or periods amounting in all to one hundred and eighty-two days or more; or
(b) [substituted clause] is in India for a period or periods amounting in all to sixty days or more during the relevant previous year and has been in India for three hundred and sixty-five days or more during the four years preceding that year.
2. The New 120-Day Rule for High-Income Individuals
Introduced in Finance Act 2020 and fully enforced in 2025, this rule applies to Indian citizens or Persons of Indian Origin (PIOs) who:
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Earn ₹15 lakh or more from Indian sources in a financial year
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And stay in India for 120 days or more but less than 182 days
If both conditions are met, the person is not treated as an NRI, and is instead classified as a resident but not ordinarily resident (RNOR).
Example: An Indian-origin individual living in the US, earning ₹25 lakh in India, and spending 130 days in India in FY 2025 will not be treated as NRI.
3. The ‘Deemed Resident’ Clause
This rule targets Indian citizens who are not liable to pay tax in any other country due to their residence status. If such individuals:
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Have total Indian income exceeding ₹15 lakh, and
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Are not taxable in any other country,
then they are treated as “deemed residents” of India, even if they don’t stay in India for 120 or 182 days.
This mainly affects high-net-worth individuals who shift base to tax havens like UAE or the Bahamas but maintain significant Indian-sourced income.
Why NRI Status Matters
Determining NRI residential status is crucial for:
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Income tax liability
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Eligibility to invest in instruments like NRE/NRO/FCNR accounts
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Reporting of global income
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Avoiding double taxation
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Access to FEMA regulations
Tax Implications Based on NRI Status
If you’re an NRI:
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Only income earned or received in India is taxable.
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Global income is not taxable in India.
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Eligible to open NRE, NRO, and FCNR accounts.
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Can invest in mutual funds, real estate, and stock markets with some restrictions.
If you’re a Resident or Deemed Resident:
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Your global income becomes taxable in India.
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You may face double taxation if not protected under a Double Taxation Avoidance Agreement (DTAA).
Recent Updates and Compliance in 2025
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Filing of Form 10FA/10FB to declare non-residency or apply for DTAA benefits
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Mandatory disclosure of foreign assets in Income Tax Returns for deemed residents
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Close watch on high-value transactions by NRIs under the new tax compliance rules
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Aadhaar-PAN linking required for NRI investors with income in India
Tips to Maintain NRI Status in 2025
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Keep a clear travel log with entry and exit stamps
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Monitor Indian-sourced income, especially rental and investment income
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Avoid excess stay (more than 120 days if high earner)
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Maintain tax residency proof (TRC) of your foreign country
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Consult a tax advisor for NRI tax planning
Understanding NRI status in 2025 has become more important than ever due to the addition of new thresholds and deemed residency rules. Staying informed about the 182-day rule, the 120-day provision for high earners, and the deemed resident clause can help individuals make smarter decisions regarding taxation, compliance, and investment. If you’re unsure, it’s always wise to consult a qualified tax advisor.
