The April 2026 tax residency change: what NRIs earning in India must know
From 1 April 2026, the rules for determining tax residency in India are changing under the Income Tax Bill 2025. If you are an NRI with significant Indian income, you need to understand what has changed — because it may affect your tax status in ways you have not anticipated.
The key change: for NRIs and Persons of Indian Origin earning more than ₹15 lakh from Indian sources (excluding foreign income), the stay threshold has increased from 60 days to 120 days. If you stay in India for 120 days or more in a financial year and have spent 365 days or more in India across the previous four years, you will be classified as Resident but Not Ordinarily Resident (RNOR).
The good news: RNOR status means only your Indian income is taxable in India. Your foreign income — salary earned abroad, foreign investments, overseas property — remains exempt during the RNOR period. This is a significant benefit compared to full Resident status, where global income becomes taxable.
The critical change: Indian citizens earning ₹15 lakh or more from Indian sources but not liable to pay tax in any other country — typically those residing in zero-tax jurisdictions like the UAE, Monaco, or Bahrain — will be treated as deemed residents of India. This applies even if they spend zero days in India during the year.
For NRI families we work with at Dhansanchay, this has specific implications. UAE-based NRIs with substantial rental income, business income, or capital gains from India need to carefully assess whether this deemed residency provision applies to them. The UAE does not have a personal income tax (the corporate tax introduced in 2023 does not apply to most individuals), which means the "not liable to tax in any other country" test could be triggered.
This is not a cause for alarm. It is a cause for planning. Obtain a Tax Residency Certificate from your country of residence. File Form 10F in India. Ensure your Indian income is accurately computed. And work with a CA who understands the interplay between FEMA residency (which determines your banking and investment rules) and Income Tax residency (which determines your tax obligations).
The two systems — FEMA and Income Tax — use different criteria. You can be an NRI under FEMA but a deemed resident under the Income Tax Act in the same year. Understanding both is essential.
We would rather you own less and understand more than the reverse. Use notes like this to ask better questions — not to shortcut diligence. Scheme documents, costs, and your own goals still come first.
NRI taxation, FEMA regulations, and DTAA provisions are complex and change frequently. This article reflects our understanding as of April 2026 and is for general education only. It is not tax, legal, or investment advice. Always consult a qualified chartered accountant or cross-border tax advisor for guidance specific to your residency status, country of residence, and financial situation.