How Residential Status of Returning NRIs is Determined

One of the Biggest Misconceptions Among Returning / Retiring NRIs is – To attain NRI status in the year of relocation:

• Stay in India for less than 182 days in the year of return, OR
• If Indian income exceeds ₹15 lakh, then stay should be restricted up to 119 days during year of return.

This belief is fundamentally incorrect and can lead to expensive mistakes.

The second condition given in section 6(1) of 60 days in the current financial year and 365 days in the preceding four financial years is often overlooked. However, it is very much applicable to returning NRIs. Only Indian Citizens or PIOs, settled outside India, coming to VISIT India are excluded from said condition.

Further, applicability of 120 days stay limit, where income from Indian sources exceeds Rs. 15 lakhs come from clause (b) of explanation 1 to section 6(1). Said clause is only applicable to NRIs coming to India with the intention of temporary stay or visit. Therefore, said clause and 120 days condition is irrelevant or non-applicable to NRIs having intention of settlement instead of visit.

For a returning NRI, the applicable test under Section 6(1) is:

• Stay of 60 days or more in the relevant financial year, AND
• Stay of 365 days or more in aggregate during the four financial years preceding the year of return

If both conditions are satisfied, the individual becomes Resident in India in the year of return.

After becoming Resident, the next determination is:

• Resident and Ordinarily Resident (ROR) OR
• Resident but Not Ordinarily Resident (RNOR)

This classification is separately determined under Section 6(6) based on residence and physical stay in ten years immediately preceding relevant financial year.