Now Reading: Income Tax Act 2025: NRI residency tests and Rs 15 lakh threshold explained
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Income Tax Act 2025: NRI residency tests and Rs 15 lakh threshold explained
Income Tax Act 2025: NRI residency tests and Rs 15 lakh threshold explained
Living overseas does not automatically make an Indian citizen a non-resident for income-tax purposes, even after the Income-tax Act, 2025 came into force on 1 April 2026. The rules for tax residency, tax liability and ITR filing remain unchanged from the old 1961 Act.
An individual is treated as a resident if they stay in India for at least 182 days during the tax year. Alternatively, a stay of 60 days in the current year combined with 365 days in the preceding four years can also trigger residency. Indian citizens leaving for employment abroad are eligible for a relaxation: only the 182-day test applies to them.
A higher threshold applies to Indian citizens and persons of Indian origin visiting India. If their income other than from foreign sources exceeds Rs 15 lakh, the alternative test replaces the 60-day limit with 120 days, provided they have also spent 365 days in the preceding four years. Deemed residency may also apply to those earning over Rs 15 lakh who are not liable to tax in any other country.
Indian Opinion Analysis
The detailed explanation of the 182-day and 120-day tests confirms that tax residency rules for NRIs remain unchanged under the 2025 Act, removing any uncertainty from the transition. The heightened 120-day threshold applies only when Indian-source income exceeds Rs 15 lakh, creating a specific compliance burden for higher-earning NRIs visiting family. Deemed residency further tightens the net by disregarding physical presence for those earning over Rs 15 lakh while enjoying zero-tax status abroad. For individuals whose stay crosses March 2026, the article clarifies that each financial year is assessed separately, with the old and new Acts governing FY 2025-26 and FY 2026-27 respectively. No next step is named, leaving NRIs to verify their specific income composition and days of stay.
Source: livemint.com
This brief was synthesised by AI from the source linked above. Methodology and corrections.
