Income tax for NRIs (FY26): what India actually taxes, and the RNOR window

Most NRI tax confusion comes from one wrong assumption: that being an NRI is about your passport, your visa, or where you live. For Indian income tax, it is none of those. It is a day-count. Get the residency question right and almost every other NRI tax question answers itself — what’s taxable, how much TDS, which return. Get it wrong and you either overpay, or you miss the single biggest legal saving available to a returning NRI. Start by finding your status with the NRI residency & RNOR calculator, then read on for what it means.

Residency decides everything

India taxes people based on residential status for each financial year, recalculated every year under Section 6 of the Income Tax Act. There are three statuses, and they set the scope of what India can tax:

Non-Resident (NRI): taxed only on Indian income.
Resident but Not Ordinarily Resident (RNOR): taxed on Indian income plus income from a business controlled in India — but foreign income stays exempt.
Resident and Ordinarily Resident (ROR): taxed on worldwide income.

The same person can move between these year to year purely on days spent in India. Your citizenship and OCI status are irrelevant to this test.

Are you an NRI this year? The day-count

You are a Resident for the year if either:

you were in India 182 days or more in the financial year; or
you were in India 60 days or more this year and 365 days or more across the previous four years.

The 60-day threshold relaxes to 182 days for Indian citizens who leave for employment abroad and for citizens/PIOs visiting India — but shrinks to 120 days if your Indian income exceeds ₹15 lakh. Meet neither condition and you are a Non-Resident. Days are counted inclusively — both arrival and departure days generally count — so frequent flyers should keep a travel log, because the department cross-checks immigration records.

What an NRI actually pays tax on

If you’re a non-resident, India taxes only India-sourced income:

Salary for services rendered in India.
Rent from property located in India.
Capital gains on Indian assets — shares, mutual funds, property.
Interest from NRO accounts and deposits.

Your foreign salary, foreign rent, and foreign investment income are not taxed in India. And two big exemptions help: interest on NRE and FCNR accounts is tax-free while you are non-resident. That’s why NRIs typically route repatriable savings through NRE/FCNR and keep Indian-earned money (rent, local income) in NRO.

A few benefits are restricted for NRIs: certain deductions under Chapter VI-A are limited, the basic exemption limit cannot be adjusted against certain special-rate incomes (like short-term equity gains), and specific TDS rules apply — most notably Section 195, where a buyer must deduct TDS on the full sale value when an NRI sells property (see the property-sale TDS calculator).

The RNOR window: the saving returning NRIs miss

Here’s the part worth real money. When you return to India for good, you don’t become a full resident (taxed on worldwide income) overnight. You usually pass through RNOR first.

You are RNOR if, being a resident, either:

you were a non-resident in at least 9 of the 10 preceding financial years; or
you were in India for 729 days or less across the 7 preceding years.

Most people returning after several years abroad satisfy at least one, giving them two to three years of RNOR status. During that window, your foreign income remains exempt in India — overseas rental income, foreign bank interest, bonuses or stock that vest from your old job, gains on foreign investments. Only once you become ordinarily resident does India tax your worldwide income.

Planning your return date and knowing how many RNOR years you have can legitimately shelter a large amount of foreign income. The mistake is coming back, assuming you’re immediately a full resident, and offering foreign income to Indian tax that the RNOR rules exempt.

Two 2020 rules that catch high earners

From FY 2020-21, two provisions target high-income Indians who game residency:

The ₹15 lakh / 120-day rule: a citizen/PIO visitor whose Indian income exceeds ₹15 lakh becomes resident at 120 days (not 182) — and is treated as RNOR.
Deemed residency: an Indian citizen with Indian income over ₹15 lakh who is not liable to tax in any country is deemed resident (RNOR), regardless of days. It targets the tax-resident-nowhere setup; it does not apply if you genuinely pay tax where you live.

DTAA: not being taxed twice

Once you’re ordinarily resident (or on Indian income that your country of residence also taxes), the Double Taxation Avoidance Agreement between India and your country prevents the same income being taxed twice — either by exempting it in one country or giving a credit for tax paid in the other. India has DTAAs with 90-plus countries. Claiming relief needs a Tax Residency Certificate (TRC) and Form 10F. Most NRIs under-claim this; it’s worth getting right.

Filing: do you even need to?

An NRI must file an Indian return if Indian taxable income exceeds the basic exemption, or to claim a refund of excess TDS (very common after a property sale or on NRO interest), or to carry forward capital losses. Given how often TDS over-deducts NRI income, filing is frequently the only way to get your own money back. Model your Indian-income liability with the income tax calculator and the capital gains calculator for any asset sales.

The short version

Your NRI status is a yearly day-count, not your passport. Check it first — use the calculator.
NRI: only Indian income taxed; NRE/FCNR interest exempt.
RNOR: Indian income taxed, foreign income exempt — a 2–3 year window returning NRIs should plan around.
ROR: worldwide income taxed, with DTAA relief.
High earners: watch the ₹15 lakh / 120-day and deemed-residency rules.
File to reclaim over-deducted TDS — often the only way to get it back.

General information, not tax advice. Residency edge cases (split years, seafarers, treaty tie-breakers) can change the answer — confirm with a chartered accountant before filing.