'I Spent More Than 182 Days Outside India, So I'm NRI': The 4-Step Test ITA 2025 Actually Uses for Tax Year 2025-26 | Harun Raaj & Associates

The three most expensive words in NRI taxation? "I'm automatically NRI." Every year, thousands of Indians working abroad, managing split-year relocations, or handling extended overseas assignments receive notices from the Income Tax Department — not because they hid income, but because they applied the wrong test to determine their own residential status. Under the Income Tax Act, 2025 (ITA 2025), residential status is not a single day-count calculation. It is a four-step filter, and missing any one step can shift your entire tax liability from zero to lakhs.

What the Law Actually Says

Under Section 6, ITA 2025 — which retains the same section number as the old Income Tax Act, 1961 — an individual is a Resident in India for a Tax Year if they satisfy either of two primary conditions:

Condition A: The individual is present in India for 182 days or more during the Tax Year.

Condition B: The individual is present in India for:

60 days or more during the Tax Year, AND

365 days or more during the four Tax Years immediately preceding the relevant Tax Year.

If neither condition is satisfied, the individual is classified as a Non-Resident Indian (NRI) for that Tax Year.

This is where most people stop reading — and where costly errors begin. Two additional rules overlay these basic conditions, and both carry substantial tax consequences.

Exception to Condition B: The Employment Carve-Out

If an Indian citizen leaves India during a Tax Year for the purpose of employment outside India (or as a crew member of an Indian ship), the 60-day threshold in Condition B is replaced by 182 days. This means the IT professional who visits home for 85 days in a tax year is NOT automatically a Resident under Condition B — they would need to stay 182 days or more before residency is triggered under this limb.

This exception applies only when the purpose of leaving was employment. If you left India for higher education, a business venture, or long-term tourism, the standard 60-day threshold applies.

The Deemed Resident Rule: Section 6(1A), ITA 2025

Under Section 6(1A), ITA 2025, an Indian citizen who is not a Resident under any other provision, but who meets both of the following, is deemed to be Resident but Not Ordinarily Resident (RNOR):

Their total income from Indian sources exceeds ₹15 lakh in the Tax Year (excluding foreign income), AND
They are not liable to tax in any other country or territory by reason of their domicile, residence, or any similar criteria.

This provision specifically targets Indians in zero-tax jurisdictions — UAE, Bahrain, Qatar, Saudi Arabia — who earn substantial Indian-source income. If you live in Dubai, earn ₹14 lakh in rental income and ₹8 lakh in dividends from Indian equities, and pay no income tax in UAE, you are deemed RNOR in India. Your Indian-source income is fully taxable.

The Three Residency Categories

Once you establish whether you are a Resident, a further sub-classification determines the scope of your Indian tax liability:

1. Resident and Ordinarily Resident (ROR): Taxed on worldwide income — every rupee earned anywhere, including your Singapore salary, UK rental property, or US dividends.

2. Resident but Not Ordinarily Resident (RNOR): Taxed only on Indian-source income and income received in India. Foreign income is exempt. This is the transitional status for returning NRIs.

3. Non-Resident Indian (NRI): Taxed only on income earned in India or received in India.

RNOR status applies when a Resident satisfies at least one of:

They were NRI in 9 out of the 10 Tax Years immediately preceding the relevant Tax Year, OR

Their total presence in India during the 7 Tax Years immediately preceding the relevant Tax Year was 729 days or less.

Practical Implications for NRIs: Three Real Scenarios

Scenario 1: IT Professional in the US, Visits India for 80 Days (Tax Year 2025-26)

An H-1B holder travels to India for a wedding and medical treatment for 80 days.

Step 1: 182 days in India? No.
Step 2: Employment exception applies (left India for employment), replacing 60 days with 182 days in Condition B. 80 days does not meet 182-day threshold — Condition B not met.
Step 3: US levies income tax — individual is outside deemed RNOR net.

Result: NRI. Only Indian-source income is taxable in India.

Scenario 2: Dubai-Based NRI Earning ₹22L from Indian Sources (Tax Year 2025-26)

Spends 40 days in India. Earns ₹14 lakh in rental income from a Mumbai property and ₹8 lakh in Indian equity dividends. Pays no income tax in UAE.

Step 1: 40 days — not a Resident under Condition A.
Step 2: Not a Resident under Condition B (insufficient prior-year accumulation).
Step 3: Indian income (₹22 lakh) exceeds ₹15 lakh. UAE levies no income tax. Section 6(1A) applies.

Result: Deemed RNOR. All ₹22 lakh of Indian-source income is taxable in India. The assumption — "I live in Dubai, so I pay no Indian tax" — is directly addressed by this provision.

Scenario 3: Software Consultant Relocating Abroad Mid-Year (Tax Year 2025-26)

Worked in India until September 2025, relocated to Singapore in October 2025. Total days in India during Tax Year 2025-26: approximately 183 days.

Step 1: 183 days — crosses the 182-day threshold. Individual is a Resident.
Step 2: They were Indian resident in prior years — RNOR conditions not met.

Result: Resident and Ordinarily Resident (ROR). The salary earned from their Singapore employer from October 2025 onwards is taxable in India. This surprises almost every person going through an international relocation — departing after October creates a full-year residency trap.

Step-by-Step: What to Do for Tax Year 2025-26

Build a day-count log: Use passport entry/exit stamps and boarding passes to count exact days in India from April 1, 2025 to March 31, 2026. Count both arrival and departure dates.
Compile prior-year day counts: Add up days spent in India during Tax Years 2024-25, 2023-24, 2022-23, and 2021-22. If total exceeds 365, Condition B's second limb is satisfied.
Apply the employment exception if applicable: If you left India to take up employment abroad, confirm this with your offer letter, appointment letter, or work visa with employer details.
Calculate Indian-source income accurately: Include rental income (net of municipal taxes only), dividends from Indian companies, interest on NRO deposits (gross, before TDS), capital gains from Indian assets, and salary credited to an Indian account. Exclude NRE and FCNR interest — fully exempt regardless of residential status.
Check tax liability in your country of residence: If you are in the US, UK, Singapore, Canada, or Australia, you are liable to local income tax — you are outside the deemed RNOR net. Collect a Tax Residency Certificate as documentary evidence.
If Resident, assess RNOR eligibility: Count NRI years in the preceding 10 Tax Years and total days in India over the preceding 7 Tax Years.
Reconcile Form 168 (formerly Form 26AS under ITA 1961): Your Form 26AS is now called Form 168 under ITA 2025. Verify that TDS deducted matches your actual residential status and applicable rates.
File ITR-2: NRIs, RNORs, and RORs with capital gains, foreign income, or multiple income heads must file ITR-2. ITR-1 is not available to NRIs.

Determine Your Status — Then Plan Around It

Residential status is not a bureaucratic label. It is the axis around which every NRI tax decision rotates — which accounts to maintain, how much TDS your tenant deducts, whether your overseas salary is exposed to Indian tax, and which ITR form is correct. Getting the determination wrong creates cascading errors across your entire return.

For your specific situation — whether you are navigating a mid-year relocation, managing income across UAE and India, or determining RNOR eligibility after returning — book a consultation at harunraaj.com.

Frequently Asked Questions

How many days outside India before becoming NRI for tax purposes?+

Under Section 6, ITA 2025, an individual is classified as NRI if they do not satisfy Condition A (182 days or more in India during the Tax Year) AND do not satisfy Condition B (60 days or more in current year plus 365 days or more in the four preceding Tax Years). However, if leaving India for employment, the 60-day threshold in Condition B is replaced by 182 days per the Employment Carve-Out provision.

Can I claim NRI status if I spent 170 days in India this year?+

No. Per Section 6, ITA 2025 Condition A, you must be present in India for 182 days or more during the Tax Year to satisfy the primary residency condition. At 170 days, you would not qualify under Condition A. Residency status would then depend on whether you meet Condition B (60 days in current year plus 365 days in preceding four years) or the Employment Carve-Out exception.

Does 182 day rule apply if I left India for employment abroad?+

The standard Section 6, ITA 2025 Condition B uses a 60-day threshold, but the Employment Carve-Out exception replaces this with 182 days. This exception applies only when you left India specifically for employment outside India or as a crew member of an Indian ship. If you left for education, business, or tourism, the standard 60-day threshold applies instead.

What is deemed resident but not ordinarily resident status under ITA 2025?+

Section 6(1A), ITA 2025 provides that an Indian citizen who is not a Resident under any other provision, but meets specific criteria, is deemed to be Resident but Not Ordinarily Resident (RNOR). This status carries distinct tax treatment separate from ordinary Resident or NRI classifications and has substantial tax consequences.

How is residential status determined for split year relocations or extended assignments?+

Under Section 6, ITA 2025, residential status uses a four-step filter: Step 1 checks Condition A (182 days in India); Step 2 checks Condition B (60 days plus 365 days in prior four years, or 182 days if employment purpose applies); Step 3 applies the Employment Carve-Out exception if applicable; Step 4 applies Section 6(1A) for deemed RNOR status. Missing any step can alter your entire tax liability classification.

Is NRI status automatic after spending 182 days abroad from India?+

No. Per Section 6, ITA 2025, NRI status is not automatic based solely on days spent abroad. An individual is NRI only if they fail both Condition A (182+ days in India) AND Condition B (60+ days in current year plus 365+ days in prior four years). The Employment Carve-Out may modify Condition B to require 182 days, and Section 6(1A) may create deemed RNOR status instead.

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