Are You Really an NRI? Section 6 Day-Count Rules, the 120-Day Trap and Deemed Residency

Your passport does not decide whether India taxes your worldwide income. A day count does. Section 6 of the Income-tax Act 1961 fixes residential status for the previous year that ran from 1 April 2025 to 31 March 2026 (assessment year 2026-27), and Section 5 then fixes the scope of what is taxable. Miss a threshold by one day and a resident is taxed on income that accrues outside India, while a non-resident is not.

The basic test in Section 6(1) has two limbs. An individual is resident if he "is in India in that year for a period or periods amounting in all to one hundred and eighty-two days or more", or if, "having within the four years preceding that year been in India for a period or periods amounting in all to three hundred and sixty-five days or more", he is in India for sixty days or more in that year (Section 6, Income-tax Act 1961).

Two relaxations and one deeming provision sit on top of that arithmetic, and they are where filings go wrong. Explanation 1(b) replaces "sixty days" with "one hundred and eighty-two days" for an Indian citizen or person of Indian origin visiting India. The Income Tax Department's guidance for non-resident individuals for AY 2026-27 records that the same sixty-day limb is instead substituted with 120 days where total income other than income from foreign sources exceeds Rs 15 lakh, and that Section 6(1A) deems an Indian citizen earning over Rs 15 lakh from Indian sources to be resident where he is not liable to pay tax in any other country.

FEMA / DTAA Position

FEMA 1999 and the Income-tax Act 1961 run on different definitions, and conflating them is the commonest error in NRI compliance. The Reserve Bank's Master Direction - Deposits and Accounts defines an NRI at paragraph 2.4 as "a person resident outside India who is a citizen of India", and at paragraph 2.5 defines a Person of Indian Origin as a person resident outside India who is a citizen of a country other than Bangladesh or Pakistan, subject to specified conditions. Both definitions were inserted by FEMA Notification No. 5(R)/2016-RB dated 1 April 2016.

FEMA status governs which bank accounts you may hold and what you may send abroad; Section 6 governs what India may tax. The two diverge inside the same twelve months: someone who moves back in July 2025 changes his FEMA position on arrival, while his tax status for FY 2025-26 still turns on whether his stay reached 182 days by 31 March 2026. The glossary entries on residential status and FEMA set both tests out.

Where the arithmetic makes you resident in India and another country's law also claims you, the tie-breaker in Article 4 of the applicable treaty decides which state has the primary claim. The India-United Kingdom treaty, in force since 26 October 1993, carries that dual-resident tie-breaker in Article 4. Any treaty position also needs a Tax Residency Certificate from the other state; under the India-UAE treaty, in force since 22 September 1993, the certificate turns on proof of an establishment in the UAE.

A treaty allocates taxing rights; it does not delete them. Under the India-UAE treaty, gains on shares of an Indian company stay taxable in India, where the long-term rate under Section 112A is 12.5%. A specific treaty position can be modelled in the DTAA benefit calculator, and the DTAA glossary entry explains how relief is claimed under Section 90(2).

Tax Treatment in India

Section 5 does the allocation. For a resident, total income includes income received or deemed to be received in India, income that accrues or arises in India, and income that accrues or arises outside India. The proviso to Section 5(1) carves out the middle category: for a person not ordinarily resident within the meaning of Section 6(6), foreign income "shall not be so included unless it is derived from a business controlled in or a profession set up in India". Section 5(2) limits a non-resident to income received or deemed received in India and income that accrues or is deemed to accrue in India (Section 5, Income-tax Act 1961).

Not-ordinarily-resident status is not a concession you apply for; it follows from the same day count. Section 6(6)(a) defines it as an individual who has been a non-resident in nine out of the ten previous years preceding that year, or who has been in India for 729 days or less during the seven preceding previous years. A returning NRI away for a decade therefore usually gets a buffer year in which foreign income stays outside the Indian net.

Rates are not softer for non-residents. The department's AY 2026-27 guidance lists the same default slabs under Section 115BAC that apply to residents: nil to Rs 4,00,000, then 5%, 10%, 15%, 20% and 25% bands ending at Rs 8,00,000, Rs 12,00,000, Rs 16,00,000, Rs 20,00,000 and Rs 24,00,000, and 30% above that. Cess adds 4% on tax plus surcharge, and the standard deduction is Rs 75,000 in the new regime against Rs 50,000 in the old.

Surcharge is where the non-resident position bites and then relents. The same guidance states that the enhanced surcharge of 25% and 37% is not levied on income chargeable under Sections 111A, 112 and 112A or on dividend income to the extent applicable to non-residents, so the maximum rate of surcharge on that income is 15%. The surcharge glossary entry sets out how it stacks on base tax.

Collection is front-loaded through Section 195, which requires withholding on payments to a non-resident at the rate in force under the Act or the treaty rate, whichever is lower. That is why an NRI landlord often finds tax deducted before a rupee arrives; the arithmetic on a let-out flat is in the NRI rental income tax calculator, and the full position in the NRI tax calculator.

On listed equity the rates changed with effect from 23 July 2024: Section 112A taxes long-term gains at 12.5% above the Rs 1.25 lakh threshold, and Section 111A taxes short-term gains at 20%.

Tax Treatment Abroad

The moment the day count makes you resident and ordinarily resident, the other country's income lands in the Indian return too, and double taxation is relieved rather than avoided. Article 24 of the India-United States treaty, in force since 12 September 1991, provides for foreign tax credit in the country of residence; the credit position can be modelled in the foreign tax credit calculator.

The United States row carries a trap. Under Article 10 the 15% dividend rate applies only where the recipient holds at least 10% of the voting stock in a direct parent-subsidiary relationship; in all other portfolio cases the rate is 25%. Article 12 applies a "make available" test before fees for technical services take the treaty rate.

Section 6(1A) is aimed at the gap between two tax systems rather than at the ordinary expatriate. An Indian citizen whose income other than from foreign sources exceeds Rs 15 lakh and who is not liable to tax in any other country by reason of domicile or residence is deemed resident, and is classified as not ordinarily resident under Section 6(6). Because the proviso to Section 5(1) keeps foreign income out of an RNOR's total income unless it comes from a business controlled in India, deemed residence does not pull an overseas salary into the Indian return. What it closes is the resident-nowhere position, where an individual claims non-residence in India while paying tax to no other state. The test is liability to tax, not tax paid, and it reaches only Indian citizens above the Rs 15 lakh line.

Repatriation Mechanics

Residential status changes the account architecture before it changes the return. Paragraph 6.10 of the RBI Master Direction provides that when a resident Indian becomes a person resident outside India, the existing resident account should be designated as an NRO account. Paragraph 4.9 runs the other way: NRE accounts should be designated resident accounts, or the funds moved to an RFC account, immediately on return to India for employment or on a change in residential status.

The ceiling to remember is USD 1 million. Paragraph 6.8 permits NRO debits for local payments, transfers to other NRO accounts and remittance of current income abroad, then states that balances "cannot be repatriated abroad except by NRIs and PIOs up to USD 1 million", subject to the Foreign Exchange Management (Remittance of Assets) Regulations 2016, with transfers to NRE and SNRR accounts counted inside the same facility. Our earlier piece on the USD 1 million NRO route for inherited property works through the documentation, and the repatriation calculator sizes the remittance after tax.

NRE accounts and FCNR(B) deposits sit on the other side of that wall. Paragraph 4.1 permits NRIs and PIOs to open NRE accounts under Schedule 1 to the Foreign Exchange Management (Deposit) Regulations 2016, and paragraph 4.7 treats current income such as rent, dividend, pension and interest as a permissible credit provided the authorised dealer is satisfied that income tax on it has been deducted or provided for. Under Schedule 2, paragraph 5.2 records that an FCNR(B) account may be held only as a fixed deposit, the currency-risk point covered in FCNR(B) deposits.

Two smaller provisions close the loop. Paragraph 6.7 allows a resident's remittance to an NRI or PIO relative, within the Liberalised Remittance Scheme limits, to be credited to that relative's NRO account, which is the only way LRS touches an NRI, as set out in why NRIs cannot use LRS. Paragraph 6.14 allows remittances net of applicable taxes on production of the formats prescribed by the Central Board of Direct Taxes, in practice the Form 15CA and Form 15CB pair.

A workable sequence for the year your status changes, working to the 31 March 2026 year end:

1. Count every day of physical presence between 1 April 2025 and 31 March 2026 and test it against 182 days first.
2. If the count is under 182, add up presence across the four preceding years and test the 365-day limb in Section 6(1)(c) against sixty days.
3. If you are an Indian citizen or PIO visiting India, check whether income other than from foreign sources crossed Rs 15 lakh. Above that figure the limb is 120 days, not 182.
4. Re-designate accounts when status changes, not at year end: resident account to NRO on departure (paragraph 6.10), NRE to resident or RFC on return (paragraph 4.9).
5. Before remitting, check the USD 1 million ceiling (paragraph 6.8), the CBDT formats (paragraph 6.14), and the Section 195 rate against the treaty rate.

FAQ

How many days can I stay in India in FY 2025-26 without becoming a resident?

For an Indian citizen or PIO visiting India whose income other than from foreign sources is Rs 15 lakh or less, the limit is 181 days, because Explanation 1(b) substitutes 182 days for the sixty-day limb. Above Rs 15 lakh the limb drops to 120 days where the 365-day history is also met.

I am deemed resident under Section 6(1A). Is my overseas salary taxable in India?

No. Section 6(1A) classifies the individual as not ordinarily resident under Section 6(6), and the proviso to Section 5(1) keeps income accruing outside India out of an RNOR's total income unless it is derived from a business controlled in or a profession set up in India. Indian-source income above the Rs 15 lakh threshold remains taxable.

What is the difference between FEMA residency and income-tax residency?

They are separate tests under separate statutes. The RBI Master Direction defines an NRI at paragraph 2.4 as a person resident outside India who is a citizen of India, and that status decides your bank accounts and remittance rights. Section 6 decides, on a day count for the year ended 31 March 2026, what India may tax.

How much can I repatriate from my NRO account in a financial year?

Paragraph 6.8 caps repatriation by NRIs and PIOs at USD 1 million per financial year, subject to the Foreign Exchange Management (Remittance of Assets) Regulations 2016, and transfers into NRE or SNRR accounts count inside that limit. Current income such as rent or interest may be remitted separately, and paragraph 6.14 requires the CBDT-prescribed formats.

Does a Tax Residency Certificate make me a non-resident in India?

No. A TRC evidences residence in the other state and opens treaty relief, including the Article 4 tie-breaker in treaties such as the India-United Kingdom treaty of 26 October 1993. Indian residential status is still decided by Section 6, so a certificate does not displace a 182-day stay.

What happens to my NRE account when I return to India for good?

Paragraph 4.9 requires NRE accounts to be designated as resident accounts, or the balances moved to an RFC account, immediately on return for employment or on a change in residential status. The tax position for that year is separate: it turns on the Section 6 day count and, if you have been non-resident in nine of the ten preceding years, on Section 6(6).