In an increasingly interconnected world, where remote work and global travel are common, understanding your tax residency status in India is more crucial than ever. Many believe that simply holding an Indian passport or getting paid in India automatically makes them a tax resident. However, the reality is more nuanced. Your tax residency status determines which of your global income is taxable in India, making it a pivotal aspect of your financial planning. Whether you're a globetrotting professional, a spouse living abroad, or someone frequently visiting family overseas, knowing if you're a Resident, Non-Resident Indian (NRI), or a Resident But Not Ordinarily Resident (RNOR) is key to smart wealth management.
So, how is your tax residency determined? The Income Tax Act, 1961, lays down specific conditions. Generally, an individual is considered an Indian resident for tax purposes if they spend 182 days or more in India during a financial year. However, there's another condition: even if you spend less than 182 days, you could still be a resident if you've been in India for at least 60 days in the current financial year AND 365 days or more in the four preceding financial years. This '60-day rule' is particularly important for those who travel frequently but maintain a base in India.
The rules become even more specific for Indian citizens or Persons of Indian Origin (PIOs) who visit India during a financial year. For this group, the 60-day threshold is extended. They are considered residents only if their stay in India exceeds 120 days in the current year AND 365 days in the four preceding years. Furthermore, if their Indian-source income (excluding foreign income) exceeds ₹15 lakhs, then the 120-day rule applies for becoming a 'Resident But Not Ordinarily Resident' (RNOR). Determining whether you are 'based' in India and visiting abroad, or vice-versa, can involve looking at factors like return ticket patterns and visa types, as courts have often considered 'visits' to imply temporary stays. It's a complex area, and understanding your specific situation is vital to avoid unintended tax implications.
