Residential status confusion is close to universal among NRIs, and it’s understandable given how the rules have shifted over the years.
Under the Income Tax Act, residential status for a financial year depends primarily on the number of days spent in India during that year and the preceding years, not on citizenship, visa status, or where someone considers “home.” Broadly, an individual is a resident if they spend 182 days or more in India in the relevant financial year, or meet an alternate day-count test involving the preceding four years, subject to specific carve-outs. Finance Act 2020 introduced tighter conditions for Indian citizens and persons of Indian origin visiting India, reducing the day threshold in certain circumstances, and also introduced the concept of a “deemed resident” for Indian citizens with total Indian income above a specified threshold who aren’t liable to tax in any other country, aimed at addressing tax-residency-nowhere situations.
Within “resident,” there’s a further distinction between Resident and Ordinarily Resident (ROR) and Resident but Not Ordinarily Resident (RNOR), and this distinction matters enormously because ROR status brings global income into the Indian tax net, while RNOR and non-resident status generally limits Indian tax liability to income earned or received in India.
The confusion usually shows up around the year someone moves back to India, or the year they leave. Residential status is determined year by year, not fixed once and forgotten, so someone who was NRI for a decade can shift status the moment their days in India cross the threshold, sometimes without realising it until the return is filed.
Getting this wrong isn’t a minor clerical issue; it changes what has to be reported and taxed entirely. Ashutosh Financial Services routinely helps individuals work through exactly where they land on this test, especially in transition years. Ashutosh Financial Services runs educational sessions specifically on residential status determination given how often it trips people up.
