By CA Surekha Ahuja
The 182-day rule is only half the story. The ₹15 lakh threshold, deemed residency and FEMA’s intention-based test can give the same person two different residential statuses in the same financial year.
There is a belief many NRIs carry:
“I live abroad. I count my days in India. I know my residential status.”
It sounds simple. It isn't.
For income-tax purposes, India determines residential status primarily through statutory tests of physical stay, with special rules for certain Indian citizens and persons of Indian origin visiting India and Indian citizens leaving India in specified circumstances.
FEMA asks a different question. It considers not only the statutory day-count framework but also the purpose and circumstances of leaving or returning to India, including whether they indicate an intention to stay outside or inside India for an uncertain period.
The result can be surprising:
You can be a Resident under the Income-tax Act and a Non-Resident under FEMA in the same year. You can also be a Non-Resident under the Income-tax Act and a Resident under FEMA.
There is no contradiction. The two laws simply ask different questions.
Run Two Separate Tests — Not One
The income-tax test asks:
- Were you in India for 182 days or more during the relevant tax year?
- If not, does the 60 days + 365 days test apply?
- Does a special rule for a visiting Indian citizen or person of Indian origin change the threshold?
- Does the ₹15 lakh income threshold become relevant?
- Could deemed residency apply?
- If resident, are you Resident and Ordinarily Resident (ROR) or Resident but Not Ordinarily Resident (RNOR)?
The FEMA test asks:
- Why did you leave India?
- Why did you return?
- Did the circumstances indicate an intention to stay outside India for an uncertain period?
- Conversely, does the return indicate an intention to stay in India for an uncertain period?
The FEMA answer cannot simply be copied from the income-tax answer.
The 182-Day Rule Is a Cliff Edge — Not the Whole Story
Broadly, an individual becomes resident for income-tax purposes if either:
| Test | Broad requirement |
|---|---|
| 182-day test | Present in India for 182 days or more during the tax year |
| 60 + 365 test | Present in India for 60 days or more during the year and 365 days or more during the preceding four years, subject to applicable exceptions |
The second test is where many NRIs get caught. They track the current year's stay but forget the rolling four-year total.
Two Diwali visits, a wedding, a medical trip, business visits and family emergencies may individually appear insignificant. Together, they can push the preceding-four-year total beyond 365 days.
Near the threshold, every day matters. Actual arrival and departure dates should be reconciled with passport and immigration records. Borderline cases may also involve issues concerning how particular days are counted.
The ₹15 Lakh Threshold Can Change the Calculation
For an Indian citizen or person of Indian origin visiting India, the ordinary 60-day rule is modified.
Broadly, where the statutory conditions are satisfied:
- if total income other than income from foreign sources does not exceed ₹15 lakh, the relevant threshold can effectively become 182 days;
- where such income exceeds ₹15 lakh, the threshold can become 120 days, together with the preceding-four-year test.
The ₹15 lakh figure does not itself make anyone resident. It determines which statutory day-count rule applies.
Example
Suppose an Indian citizen living abroad has:
- Indian-source income: ₹18 lakh
- Foreign salary: ₹2 crore
- Stay in India: 130 days
He cannot simply say:
“I am below 182 days, so I am non-resident.”
The ₹15 lakh threshold, the 120-day rule and the preceding-four-year stay must all be examined.
Deemed Residency: When Counting Days May Not Be Enough
An Indian citizen may also be deemed resident where:
- total income, other than income from foreign sources, exceeds ₹15 lakh; and
- the individual is not liable to tax in any other country or territory by reason of domicile, residence or a similar criterion.
Thus, someone spending only 40 days in India cannot necessarily rely on the day count if the statutory conditions for deemed residency are met.
But deemed resident does not automatically mean ROR. RNOR status must still be examined, because it can materially affect the taxation of foreign income.
The analysis is therefore:
First — am I resident?
Second — if resident, am I ROR or RNOR?
FEMA — The Second Rulebook
FEMA is fundamentally different.
Under section 2(v) of FEMA, the residence test includes the statutory day-count framework but also specifically considers the purpose of departure from India and the purpose of coming to or staying in India.
A person leaving India:
- for employment outside India;
- to carry on business or vocation outside India; or
- for any other purpose indicating an intention to stay outside India for an uncertain period,
can be a person resident outside India.
Similarly, a person coming to or staying in India:
- for employment;
- for business or vocation; or
- for any other purpose indicating an intention to stay in India for an uncertain period,
can become a person resident in India under FEMA.
In simple terms:
| Income-tax | FEMA |
|---|---|
| Primarily asks how long were you in India? | Also asks why did you leave or return, and what do the circumstances indicate? |
| Uses statutory tax-year tests | Uses its own statutory framework, including purpose and intention |
| Determines tax residence and taxation scope | Determines foreign-exchange, banking, investment and remittance consequences |
One Person, Two Answers
Tax Resident + FEMA Non-Resident
An Indian citizen living abroad returns for an extended family and business visit. His stay becomes sufficient for income-tax residence, but the circumstances remain temporary and do not indicate an intention to stay in India for an uncertain period.
Income-tax: Resident
FEMA: Non-Resident
Tax Non-Resident + FEMA Resident
An individual returns to India to take up employment or otherwise settle for an uncertain period. FEMA residence may arise even though the individual has not yet spent enough days in India to satisfy the income-tax test.
Income-tax: Non-Resident
FEMA: Resident
Both positions can genuinely coexist.
The Four Combinations Every NRI Should Understand
| Residential position | How it can arise | Practical consequence |
|---|---|---|
| Tax Resident + FEMA Non-Resident | Tax day-count test satisfied, but FEMA circumstances indicate continued residence abroad | Tax and FEMA consequences must be determined independently |
| Tax Non-Resident + FEMA Resident | Return indicates intention to stay in India for an uncertain period, but tax day-count test is not yet met | FEMA consequences can arise before tax residence |
| Tax Resident + FEMA Resident | Both frameworks produce residence | Both sets of obligations must be examined separately |
| Tax Non-Resident + FEMA Non-Resident | Person remains based abroad and neither framework changes status | Conventional NRI position |
“Resident” is not one universal legal status. It is a conclusion reached separately under separate laws.
FEMA Status Can Change Before Income-tax Status
A common mistake is assuming that residential status changes only on 1 April.
Under FEMA, where circumstances change so that a person becomes resident, relevant consequences can arise from the date of that change, even though income-tax residence is determined after considering the complete tax year.
This matters particularly for:
- NRE accounts
- NRO accounts
- FCNR(B) deposits
- foreign-currency holdings
- overseas investments
- remittances and repatriation arrangements
An NRI returning to India should therefore review the treatment of these accounts at the time of the move, rather than waiting for the income-tax return.
Foreign Assets: Residency Also Changes the Compliance Question
A returning Indian may hold:
- foreign bank accounts;
- overseas brokerage accounts;
- foreign company shares;
- foreign immovable property;
- pension or retirement accounts; or
- interests in foreign trusts or entities.
Once tax-resident status arises, the requirements concerning foreign income and foreign-asset disclosure, including Schedule FA where applicable, must be examined.
The obligation is not identical for every resident: RNOR status and the applicable return provisions matter.
Separately, the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 can create additional compliance and penalty exposure.
The correct sequence is:
Determine residence → determine ROR/RNOR → determine foreign-income and foreign-asset reporting obligations.
The NRI's Five-Point Annual Check
Before concluding “I am non-resident”, answer these five questions:
- How many days was I actually in India? Reconcile passport and immigration records.
- What was my stay during the preceding four years? The 365-day cumulative test can be decisive.
- Does the ₹15 lakh threshold affect my applicable test? Being below 182 days does not necessarily settle the question.
- Could deemed residency apply? Check this where Indian-source income exceeds ₹15 lakh and the individual is not liable to tax elsewhere by domicile, residence or a similar criterion.
- What is my FEMA status independently? Examine why you left, why you returned and what the circumstances indicate about your intended period of stay.
Only then should the consequences for tax returns, foreign assets, NRE/NRO/FCNR accounts, remittances and repatriation be determined.
The Closing Perspective
For an NRI, “Am I resident?” is the wrong question to start with.
The better questions are:
- Resident under which law?
- From what date?
- Under which statutory test?
- ROR or RNOR for income-tax purposes?
- What compliance follows?
The Income-tax Act and FEMA are two separate legal frameworks with different purposes, tests and consequences. That is why the same individual can be Tax Resident + FEMA Non-Resident, or Tax Non-Resident + FEMA Resident, in the same year.
The professional approach is simple:
Track the days. Check the ₹15 lakh threshold. Test deemed residency. Determine ROR/RNOR. Then independently establish FEMA status.
Do this before a long visit, before returning to India, before changing employment, and before changing the treatment of NRE, NRO or FCNR(B) accounts.
Residential status is not merely a box to be ticked once a year. For an NRI, it is a legal conclusion that may have to be tested separately under more than one law.
