Section 6 residency tests for NRIs: 182, 60-day, and the 120-day Rs 15 lakh trap

For an Indian passport-holder earning in Dubai, Singapore or New Jersey, the most consequential number of the financial year is not a salary figure but the count of days physically spent on Indian soil. Section 6 of the Income Tax Act 1961 turns that day count into a legal residential status, and that status decides whether India taxes your worldwide income or only the income arising within its borders. Misjudge the count by a fortnight and a planned "non-resident" can be assessed as "resident and ordinarily resident", with a global return to file for assessment year 2026-27.

The Finance Act 2020 rewrote the framework with effect from FY 2020-21, inserting Section 6(1A) and narrowing the room for high-income visitors. For FY 2025-26 — the year from 1 April 2025 to 31 March 2026 — four numbers decide the outcome: 182 days, 60 days, 120 days and one income line of Rs 15 lakh. This article works through each test, the two carve-outs genuine NRIs rely on, the Section 6(1A) "deemed resident" rule that catches Indian citizens in zero-tax jurisdictions, and why income tax residency differs from the residency that governs your NRE and NRO accounts.

FEMA / DTAA Position

India runs two parallel residency systems that do not move in step. The Income Tax Act, Section 6, is a mechanical day-count test applied financial year by financial year. The Foreign Exchange Management Act 1999 (FEMA), Section 2(v), is an intent-and-purpose test. The two routinely produce opposite answers across the same 12 months.

Under FEMA Section 2(v), a "person resident in India" is, at first glance, someone who resided in India for more than 182 days during the preceding financial year. But the clause carves out anyone who leaves, or stays outside, India for employment, business, or any purpose indicating an intention to remain abroad for an uncertain period. The RBI's Master Direction on Deposits and Accounts treats this as decisive: a professional who flies to Doha for a job becomes a "person resident outside India" from the day of departure, whatever the day count shows. FEMA residency, not income tax residency, controls which bank accounts you may legally hold and whether your NRE interest stays exempt — and a returning NRI can be a FEMA non-resident yet an income tax resident in the same year.

The third layer is the tax treaty. Where domestic law makes you a resident of both countries in the same period, the relevant Double Taxation Avoidance Agreement (DTAA) breaks the tie. Article 4 of every Indian treaty applies a fixed cascade: permanent home, then centre of vital interests, then habitual abode, then nationality, and finally a mutual agreement procedure. The India-US treaty has been in force since 12 September 1991, the India-UAE treaty since 22 September 1993, the India-UK treaty since 26 October 1993 and the India-Singapore treaty since 27 May 1994. A dual resident does not choose — the cascade decides.

Tax Treatment in India

Section 6(1) sets two basic tests; an individual who satisfies either becomes a resident for that financial year. Test (a): presence in India for 182 days or more during the financial year. Test (b): presence for 60 days or more in the financial year and 365 days or more across the four preceding financial years. Fail both and you are a non-resident. The statutory text is published by the Income Tax Department.

Two exceptions soften test (b) for genuine NRIs.

Exception 1 — leaving India for employment. Where an Indian citizen leaves India in the financial year for employment outside India, or as crew of an Indian ship, only the 182-day test applies; the 60-day limb is switched off. An engineer who departs for a Berlin job on 20 September 2025 having spent 173 days in India stays non-resident, because 173 is below 182.

Exception 2 — visiting India. Where an Indian citizen or Person of Indian Origin (PIO) living abroad visits India, the 60-day limb is replaced — but the replacement depends on income. If total income excluding foreign-source income exceeds Rs 15 lakh in the financial year, the test becomes 182 days OR 120 days plus 365 days across the preceding four years. If India-sourced income is Rs 15 lakh or below, only the 182-day test applies. This is the "120-day trap": a high-earning NRI with Indian rent, capital gains or directors' fees above Rs 15 lakh loses 62 days of safe visiting time.

Section 6(1A) — the deemed resident. The Finance Act 2020 closed a long-standing gap. An Indian citizen whose total income other than foreign-source income exceeds Rs 15 lakh, and who is not liable to tax in any other country by reason of domicile, residence or a similar criterion, is deemed resident — irrespective of days spent here. It targets Indians who are tax-resident nowhere. It does not apply to PIOs, nor where the person is already resident under Section 6(1). A deemed resident is always "not ordinarily resident" under Section 6(6), so the bite falls on India-sourced income — but the duty to file a return for AY 2026-27 is real.

RNOR — the buffer status. Section 6(6) sits between resident and non-resident. A person resident under Section 6(1) is further classified "resident but not ordinarily resident" (RNOR) if they were non-resident in 9 of the 10 preceding financial years, or present in India for 729 days or less across the 7 preceding financial years. The 120-day visitor and the Section 6(1A) deemed resident are also RNOR by statute. RNOR is the most valuable status for a returning NRI — foreign income stays outside the Indian net, often for two to three years after return.

The status also drives the arithmetic. A non-resident's India income suffers tax deduction at source under Section 195 — NRO interest, for instance, at 30% plus surcharge and 4% cess. Surcharge runs at 10% above Rs 50 lakh, 15% above Rs 1 crore and 25% above Rs 2 crore, with the new-regime surcharge capped at 25% beyond Rs 5 crore. The Section 87A rebate — Rs 60,000 in the new regime for FY 2025-26 where total income is up to Rs 12 lakh — is available only to resident individuals, so crossing the line can switch it on. Check your figure on the NRI income tax calculator.

Tax Treatment Abroad

Becoming ordinarily resident in India makes worldwide income taxable here, but foreign tax already paid is not lost — it converts into a foreign tax credit (FTC). Relief flows from the DTAA under Section 90 where a treaty exists, and from Section 91 where it does not. The credit is claimed by filing Form 67 under Rule 128 of the Income Tax Rules, on or before the end of the relevant assessment year; miss the form and the credit can be denied even though the tax was genuinely paid.

The interaction is sharpest for Indians in the United States, where a citizen or green-card holder is taxed by the IRS on worldwide income wherever they live. An NRI who also becomes an Indian resident then faces two worldwide claims at once; the India-US DTAA, in force since 12 September 1991, resolves this through the Article 4 tie-breaker and the Article 24 credit. Treaty ceilings cap what India may charge a treaty resident on passive income, as the table sets out.

The opposite problem appears in the Gulf. The United Arab Emirates levies no personal income tax — exactly the condition Section 6(1A) targets. An Indian citizen in Dubai with India-sourced income above Rs 15 lakh who is "not liable to tax" anywhere can be deemed resident after only a handful of days here. The India-UAE DTAA, effective 22 September 1993, still caps India-side withholding at 10% on dividends and 10% on royalties, but its protection now hinges on a valid UAE Tax Residency Certificate proving liability to tax there.

The Singapore route shows treaties evolving. The 2017 protocol to the India-Singapore DTAA ended the old capital-gains exemption: shares of an Indian company acquired on or after 1 April 2017 are taxable in India, with long-term gains charged at 12.5%. No DTAA treats Indian capital gains as fully exempt — India retains taxing rights at 12.5% across the US, UK, UAE and Singapore treaties alike. Model the relief on the foreign tax credit calculator.

Repatriation Mechanics

Once residency is settled, moving money is governed by FEMA and the RBI, not the Income Tax Act. NRIs operate three account types, each with its own repatriation rule.

The NRE account is a rupee account funded from foreign earnings; principal and interest are fully repatriable, and interest is exempt under Section 10(4)(ii) while the holder is a person resident outside India under FEMA. The FCNR(B) deposit is a foreign-currency term deposit of one to five years, also fully repatriable, with interest exempt for non-residents and no rupee exchange risk. The NRO account holds India-sourced income — rent, dividends, pension — its interest is fully taxable, and repatriation is capped at USD 1 million per financial year across all NRO accounts, allowed only after taxes are paid and Forms 15CA and 15CB are filed.

The rules bite hardest when residency changes. On returning to India for good and becoming a FEMA resident, NRE and FCNR accounts must be redesignated: NRE balances convert to a resident rupee account, and FCNR deposits may run to maturity before moving into a Resident Foreign Currency (RFC) account that keeps funds in foreign currency. The NRO account becomes an ordinary resident account. Critically, the Section 10(4)(ii) exemption on NRE interest stops the day FEMA residency changes — treating that interest as tax-free after return is a common, costly error. Model the timing on the NRI repatriation calculator and test any India-source rent on the NRI rental income tax calculator.

The discipline is unforgiving. Keep a dated log of every India entry and exit stamp, reconcile it against the 182, 60 and 120-day thresholds before the financial year closes on 31 March 2026, and treat Rs 15 lakh of India-sourced income as the line that activates both the 120-day test and Section 6(1A). In a marginal year, a departure even one week earlier can preserve non-resident status for all of AY 2026-27.

FAQ

Do days of arrival and departure both count towards the 182-day test?

Yes. The Income Tax Department and consistent tribunal rulings treat both the day you land in India and the day you leave as days of physical presence, each counting towards the 182, 60 and 120-day tests under Section 6. Near a threshold, one trip can add two days, so the passport entry and exit stamps are the primary evidence — retain them for at least six assessment years.

Is an NRI in the UAE automatically a deemed resident under Section 6(1A)?

No. Section 6(1A) applies only when two conditions are met together: the individual is an Indian citizen with total income other than foreign-source income above Rs 15 lakh in the financial year, and is not liable to tax in any country by domicile or residence. An NRI in the UAE with India-sourced income of Rs 15 lakh or below is not caught, and a valid UAE Tax Residency Certificate can evidence liability to tax there.

What is the difference between RNOR and non-resident?

A non-resident is taxed in India only on income received, accruing or arising in India. An RNOR is taxed on that same India-sourced income plus income from a business controlled in or profession set up in India, but genuinely foreign income stays untaxed. A resident and ordinarily resident is taxed on worldwide income. RNOR is a valuable transition status, often lasting two to three years after return under Section 6(6).

Does FEMA residency change on the same day as income tax residency?

Rarely. Income tax residency is decided by a day count for the whole financial year under Section 6, while FEMA residency under Section 2(v) of the Foreign Exchange Management Act 1999 can change on the day you depart or arrive, based on the purpose of the move. Being a FEMA non-resident while assessed as RNOR for income tax in the same year is normal.

Can a non-resident claim the Section 87A rebate of Rs 60,000?

No. The Section 87A rebate — Rs 60,000 in the new regime for FY 2025-26 where total income does not exceed Rs 12 lakh — is available only to resident individuals. A non-resident cannot claim it at any income level. It is one direct arithmetic consequence of crossing the residency line.

How is the 365-day, four-year condition counted?

Test (b) of Section 6(1) requires 365 days or more of presence in India across the four financial years immediately preceding the current one. The 365 days are aggregated across those four years, not required in any single year. Combined with 60 days — or 120 days for high-income visitors above Rs 15 lakh — in the current financial year, satisfying it makes the person a resident.