Your day count decides your tax residence. Your purpose decides your FEMA residence. The two often give different answers, and the gap is where most mistakes start.
In India during the tax year makes you resident for income tax, whatever your reason for being here.
Indian income above this changes the visitor test to 120 days and can make a citizen resident by deeming.
Or fewer in India over the previous seven years keeps a returning resident "not ordinarily resident".
Foreign assets, other than immovable property, below this value escape the ₹10 lakh non-disclosure penalty.
Indian income tax and foreign exchange law (FEMA) each have their own test of residence. Income tax counts days. FEMA looks at the days in the previous financial year and at why you are in or out of India: for employment, for business, or with an intention to stay for an uncertain period.
The tests are not linked. Someone who leaves for a job abroad in September can be a non-resident under FEMA from the day they leave, yet still resident for income tax for that year. Bank accounts, investments and property follow FEMA. Your tax return follows the Income-tax Act. Plans built on one test alone tend to go wrong on the other.
| Question | Income tax | FEMA |
|---|---|---|
| What decides it | Days physically in India | Days in the previous year, plus the purpose of your stay |
| Period | The whole tax year (April to March) | Can change on the day you leave or arrive |
| What it governs | Which income India taxes, and your return | Accounts, investments, property and remittances |
You are resident in a tax year if you are in India for 182 days or more. You are also resident if you spend 60 days in the year and 365 days in the four years before it.
The 60-day test is relaxed for Indian citizens and people of Indian origin who live abroad and visit. For them the 60 becomes 182, unless their Indian income (excluding foreign income) is above ₹15 lakh, when it becomes 120. An Indian citizen who leaves for employment abroad in the year also gets the 182-day threshold.
A separate rule catches citizens who are not taxed anywhere. An Indian citizen with Indian income above ₹15 lakh who is not liable to tax in any other country because of domicile or residence is treated as resident in India, even with very few days here.
Most errors we see are not about rates. They come from assuming that leaving India for tax means leaving India for FEMA, or the other way round.
TAAR-NRI research
A person who becomes resident is "resident but not ordinarily resident" (RNOR) if they were non-resident in 9 of the 10 previous years, or spent 729 days or fewer in India in the previous seven years. Visitors caught by the 120-day rule and citizens who are deemed resident are also RNOR.
RNOR status matters because foreign income that is neither earned in India nor from a business controlled here generally stays outside Indian tax. For many returning families, those years are the time to sort out foreign accounts, pensions and investments before full residence begins. The exact number of RNOR years depends on your travel history, so it is worth working out year by year rather than assuming two.
Once you become a person resident outside India under FEMA, ordinary savings accounts should be redesignated as NRO accounts. NRE and FCNR(B) deposits are open only to non-residents, and the interest on them is generally exempt from Indian tax while you qualify.
When you return, the order reverses. NRE accounts should be redesignated, and FCNR(B) deposits can usually run to maturity. The tax exemption on FCNR(B) interest can continue while you are RNOR, but NRE interest follows a different condition.
A resident and ordinarily resident taxpayer must list foreign assets and foreign-source income in Schedule FA of the return, even where no tax is due. Missing assets can attract a penalty of ₹10 lakh under the Black Money Act.
Since 1 October 2024, sections 42 and 43 of that Act do not apply this penalty where the total value of foreign assets, other than immovable property, is ₹20 lakh or less. The disclosure duty itself remains. RNOR and non-resident taxpayers do not file Schedule FA.
The Income-tax Act, 2025 applies from 1 April 2026. It replaces "previous year" and "assessment year" with a single tax year, and renumbers most sections and forms. The residence tests above carry over in substance.
Returns for 2025-26 and earlier still use the 1961 Act, so for the next few years many people will deal with both. Section numbers quoted in older advice, bank letters and online articles will often be out of date. for any form or section number that depends on the new Act's notified rules.
TAAR asks about your travel history, income and plans, and works out your likely tax and FEMA residence for each year. It then lists the issues that apply to you, with the documents to gather and the questions to ask your chartered accountant.
This report is general information for tax year 2026-27, not tax, legal or FEMA advice. Rules depend on your facts; confirm them with a chartered accountant before you act.