Determining your residential status in India is the first and most critical step before calculating your income tax liability. Whether you are a citizen, an NRI, or a foreign national earning income from Indian sources, your tax obligations depend on how many days you physically stayed in the country during a financial year. The Income-tax Act, 1961, lays out clear rules to classify a person as a Resident, Resident but Not Ordinarily Resident (RNOR), or Non-Resident (NR), each with distinct tax implications.

According to the Income-tax Act, an individual is considered a Resident in India for a financial year if: (a) they are in India for 182 days or more during that year, or (b) they are in India for at least 60 days in that year and 365 days or more in the 4 preceding years. However, for Indian citizens or Persons of Indian Origin (PIOs) who visit India, the 60-day condition is extended to 182 days, unless their total income (excluding foreign income) exceeds ₹15 lakh—in which case, the 60-day threshold applies.

In Budget 2020, a new clause was introduced for Indian citizens earning over ₹15 lakh and not liable to tax in any other country. If such individuals stay in India for 120 days or more during the financial year, they may be deemed Residents—a move aimed at curbing tax avoidance by stateless high-net-worth individuals. These detailed rules ensure that residency isn't misused to evade taxes, while still protecting genuine NRIs and returning Indians.

Once classified as a Resident, the next level of distinction—Ordinarily Resident or Not Ordinarily Resident—comes into play. A person becomes RNOR if they have been a non-resident in 9 out of the last 10 years, or if they were in India for less than 729 days in the last 7 years. The RNOR status limits tax liability to Indian income only, offering some relief to those recently relocating back to India.

To summarize, understanding your residential status is essential for correct tax planning and compliance. NRIs and expatriates must carefully track their days in India and be aware of recent amendments. If your income spans across borders, a proper determination of residency can help you avoid double taxation and ensure accurate filings under Indian tax law. As we move into FY 2025–26, staying informed is your first step toward stress-free taxation.