Counting Your Days Right: How Section 6 Decides if You Are NRI, Resident or RNOR for Indian Tax

For a non-resident Indian, the single most consequential figure in the Income Tax Act, 1961 is not a tax rate but a day count. Section 6 of the Act decides, purely by tallying how many days you physically spent in India during the previous year (1 April to 31 March), whether you are a Resident, a Resident but Not Ordinarily Resident (RNOR) or a Non-Resident. That status is re-fixed afresh every financial year, and it governs whether your Dubai salary, your US brokerage gains or your UK rental income fall within the Indian tax net at all.

The Income Tax Department's Non-Resident Individual help page on incometax.gov.in sets the basic rule in two limbs: an individual is resident in India in a previous year if present for 182 days or more in that year, or for 60 days or more in that year together with 365 days or more across the four preceding years. Failing both limbs makes you a Non-Resident. The 60-day limb, however, is relaxed to 182 days for Indian citizens and persons of Indian origin (PIOs) who only visit India, which is the lifeline most working NRIs rely on. This article maps the day-count tests against the parallel FEMA definition, the deemed-resident rule introduced by Finance Act 2020, and the consequences for cross-border income.

FEMA / DTAA Position

An NRI lives under two separate residency definitions that do not move in step. The Foreign Exchange Management Act, 1999 defines a \"person resident in India\" in Section 2(v) using a 182-day test applied to the preceding financial year, layered with intent: someone who leaves India for employment, business or an uncertain-duration stay abroad becomes a person resident outside India almost immediately, irrespective of the raw day count. By contrast, Section 6 of the Income Tax Act counts days in the current previous year with no intent element. It is therefore entirely possible, in the year you migrate, to be a non-resident under FEMA from the date of departure yet still a resident under the Income Tax Act because you crossed 182 days before leaving. You can read the precise wording of FEMA Section 2 on indiacode.nic.in.

This split matters because FEMA governs what bank accounts you may hold and how you may repatriate money, while the Income Tax Act governs what is taxed. Misreading one for the other is the most common compliance error among first-year migrants. The residential status you carry under each statute should be assessed independently for the same year.

Where two countries both claim you as resident, the Double Taxation Avoidance Agreement steps in. Every comprehensive Indian treaty carries a tie-breaker in Article 4: it resolves dual residence in a cascading order of permanent home, centre of vital interests, habitual abode and finally nationality. The India-UK DTAA, effective 26 October 1993, and the India-USA DTAA, effective 12 September 1991, both contain this Article 4 mechanism. A Tax Residency Certificate (TRC) is the documentary key that unlocks treaty relief; the India-UAE treaty, effective 22 September 1993, specifically requires proof of a UAE establishment before the TRC is honoured. The DTAA you invoke does not override Section 6 domestically; it only restricts how much India may ultimately tax.

The decision table below sets out the Section 6 limbs in the order you should apply them.

Tax Treatment in India

Once status is fixed, Section 5 of the Income Tax Act decides the scope of what India taxes. A Resident and Ordinarily Resident is taxed on global income. A Non-Resident is taxed only on income that accrues, arises or is received in India. An RNOR sits in between: foreign-source income is shielded unless it derives from a business controlled in, or a profession set up in, India. For most NRIs and recent returnees, the RNOR window is the difference between paying Indian tax on a foreign pension and not paying it.

Two Finance Act 2020 changes tightened this map. First, an Indian citizen or PIO whose total India-source income exceeds Rs 15 lakh and who stays between 120 and 181 days is pulled into residence, but is classified as RNOR rather than ordinarily resident. Second, Section 6(1A) created the \"deemed resident\": an Indian citizen with India-source income above Rs 15 lakh who is not liable to tax in any other country by reason of domicile or residence is deemed resident, again as an RNOR. This provision targets so-called stateless residents who anchored themselves in zero-tax jurisdictions; it does not apply to a genuine UAE-employed NRI who pays into the UAE system and holds a valid TRC.

The classic RNOR definition in Section 6(6) still operates alongside these rules. A person who qualifies as resident is treated as RNOR if they were a Non-Resident in India in 9 out of the 10 preceding previous years, or were in India for 729 days or less across the 7 preceding previous years. A returning NRI typically enjoys RNOR status for two to three years before becoming ordinarily resident.

On the mechanics of payment, tax on a Non-Resident's Indian income is frequently collected at source. Section 195 obliges any payer remitting taxable sums to a Non-Resident to deduct TDS at the applicable rate before payment, with no basic exemption threshold of the kind residents enjoy. Where total income crosses Rs 50 lakh, a surcharge applies on the base tax, rising in steps; under the new tax regime the surcharge is capped at 25 per cent even above Rs 5 crore, and a 4 per cent health and education cess sits on top of tax plus surcharge. Crucially, the Section 87A rebate, which is Rs 60,000 under the new regime for total income up to Rs 12 lakh in FY 2025-26, is available only to resident individuals, so a Non-Resident computes tax straight on the slabs. You can estimate the net liability with our NRI income tax calculator and, for let-out Indian property, the NRI rental income tax calculator.

Tax Treatment Abroad

For income that India is entitled to tax, the country where you are resident usually taxes the same income again and then relieves the overlap through a foreign tax credit. The India-USA treaty addresses this in Article 24 and the India-UK treaty in its corresponding relief article: the residence country grants credit for the Indian tax paid, so you are not taxed twice on the same rupee. The treaty also caps the rate India may levy on passive flows, which is where the DTAA delivers most of its day-to-day value.

The table below sets out the ceiling rates India may apply to common cross-border flows under three of the most-used treaties. Note that none of these treaties exempts capital gains: India retains the right to tax long-term capital gains on shares of an Indian company, with the domestic long-term rate now 12.5 per cent after Budget 2024 (effective 23 July 2024).

A practical wrinkle sits inside the US dividend rate. Under Article 10 of the India-USA treaty, the 15 per cent rate applies only where the recipient holds at least 10 per cent of the voting stock in a direct parent-subsidiary relationship; in all ordinary portfolio cases the treaty rate is 25 per cent. The India-USA and India-UK treaties both also carry a \"make available\" test in Article 12, which narrows what counts as taxable fees for technical services. Treaty relief is never automatic: it must be claimed with a TRC and Form 10F, and the foreign tax credit in your country of residence is claimed under that country's own filing.

Repatriation Mechanics

Residential status under FEMA directly drives which bank accounts you may hold, and re-designating them on a status change is a legal obligation, not an option. The Reserve Bank of India's FEMA notifications, available on rbi.org.in, recognise three principal NRI account types, each with its own repatriation and tax character.

The NRE account and FCNR deposit carry full repatriability, which is why salary saved abroad should route through them rather than an NRO account. NRO balances, by contrast, are subject to the USD 1 million per financial year repatriation ceiling and require a chartered accountant's certificate in Forms 15CA and 15CB before remittance. When you cease to be a Non-Resident under FEMA on returning to India, NRE and FCNR accounts must be re-designated as resident accounts or moved to a Resident Foreign Currency (RFC) account; continuing to operate them as NRI accounts is a FEMA contravention. You can model a remittance with our NRI repatriation calculator.

The order of operations matters. Status under Section 6 fixes the tax; status under FEMA fixes the account and the route. Getting the day count wrong at the start of the year cascades into wrong TDS, wrong account type and a blocked repatriation later. Counting your days is the cheapest piece of tax planning an NRI will ever do.

FAQ

Does the 182-day count run on the calendar year or the financial year?

It runs on the previous year as defined in the Income Tax Act, 1961, which is the financial year from 1 April to 31 March. Your days in India are totalled afresh for each such year, so a status assigned for FY 2025-26 carries no presumption into FY 2026-27. A single day's mistake near the 182-day line can flip your entire global income into the Indian net.

I am an Indian citizen working in Dubai and my India income is under Rs 15 lakh. How many days can I stay?

Because your India-source income does not exceed Rs 15 lakh, the relaxed 182-day visiting test applies. You can remain in India for up to 181 days in the financial year and still be a Non-Resident, provided you do not separately satisfy any other limb of Section 6(1). Cross 182 days and you become resident for that year.

What is the difference between RNOR and Non-Resident for foreign income?

Under Section 5 of the Income Tax Act, both a Non-Resident and an RNOR are shielded from Indian tax on foreign-source income that neither accrues in India nor is received in India. The RNOR is technically a resident sub-category created by Section 6(6), and the difference is mainly that an RNOR can be pulled in on income from a business controlled in India, whereas a pure Non-Resident cannot.

Can a Non-Resident claim the Section 87A rebate of Rs 60,000?

No. The Section 87A rebate, which stands at Rs 60,000 under the new tax regime for total income up to Rs 12 lakh in FY 2025-26, is available only to resident individuals. A Non-Resident computes tax directly on the slabs without this rebate, which is one reason the day count can materially change a tax bill.

Does FEMA decide my residency the same way Section 6 does?

No. FEMA, 1999 (Section 2(v)) uses a 182-day test on the preceding financial year combined with intent of stay, while Section 6 of the Income Tax Act counts days in the current previous year with no intent element. You can be a resident under one law and a non-resident under the other in the same year, so assess each separately.

If a treaty makes me resident of another country, am I still taxed as resident in India?

If you are a dual resident, the tie-breaker in Article 4 of the relevant DTAA, for example the India-UK treaty effective 26 October 1993, allocates residence to one country based on permanent home, centre of vital interests and habitual abode. India then taxes you only as the treaty permits, even where Section 6 classifies you as resident domestically, provided you hold a valid TRC and file Form 10F.