(INDIA) — India’s tax rules treat a Non-Resident Individual for Assessment Year 2026–27 as a person who is not resident in India under section 6 of the Income-tax Act, 1961, with status decided mainly by the number of days spent in India during the relevant year and, in some cases, earlier years.

That distinction reaches well beyond labels commonly used by Indians abroad. It affects Indian tax filing, the treatment of bank interest, rental income, capital gains and other Indian-source earnings, and access to NRI banking products used by workers in the United States, Canada, the United Kingdom, Australia, the UAE and elsewhere.

Assessment Year 2026–27 is the year in which income is assessed and the return is filed. The corresponding previous year is Financial Year 2025–26, running from April 1, 2025 to March 31, 2026, and that is the period used to judge an individual’s residential status for Indian tax purposes.

Indian tax law applies two primary tests. An individual is generally resident in India if he or she is in India for 182 days or more during the relevant previous year, or if he or she is in India for 60 days or more during that year and for 365 days or more during the four immediately preceding previous years.

If neither test is met, the individual is non-resident for that year. For AY 2026–27, the relevant stay in India falls within FY 2025–26, while the earlier four-year lookback would generally cover FY 2021–22, FY 2022–23, FY 2023–24 and FY 2024–25.

The first test is the simpler one. A person who stayed in India for 182 days or more between April 1, 2025 and March 31, 2026 is generally treated as resident in India for Assessment Year 2026–27; a stay below that threshold does not satisfy that test.

The second test has two parts and both must be satisfied. The individual must be in India for at least 60 days during FY 2025–26, and must also have been in India for at least 365 days across the four immediately preceding previous years.

That rule often matters in cases where a person spends less than six months in India during the year under review but has accumulated longer stays over time. A short trip alone does not settle the issue if the four-year total crosses the statutory threshold.

Indian citizens leaving India for employment abroad get a separate concession built into the law. In those cases, the 60-day condition in the second test is generally replaced by 182 days, a change that affects workers leaving on routes such as H-1B, L-1, an employment visa or a work permit.

That means an Indian citizen who leaves for a job in the United States does not face the ordinary 60-day trigger in the usual way. The higher 182-day threshold becomes relevant instead, which is why short visits to India during the year do not automatically make that person resident for tax purposes.

A related special rule covers Indian citizens and persons of Indian origin visiting India. In those cases, the 60-day condition may also be replaced by 182 days, but the Finance Act, 2020 added a narrower test under which a 120-day threshold may apply if total income, excluding income from foreign sources, exceeds ₹15 lakh during the previous year.

That income threshold has made day counting more important for affluent Indians abroad who spend extended time in India. A person with substantial Indian income cannot assume non-resident status solely because the stay remained below 182 days.

The Finance Act, 2020 also introduced section 6(1A), effective from AY 2021–22, creating a deemed resident rule. Under that provision, an Indian citizen may be deemed resident in India if total income, excluding income from foreign sources, exceeds ₹15 lakh and the person is not liable to tax in any other country or territory by reason of domicile, residence or similar criteria.

That rule targets cases in which an Indian citizen is not liable to tax anywhere else. It does not automatically cover an Indian citizen working abroad on H-1B, because a person employed in the United States may often be liable to tax there under U.S. tax rules.

The contrast becomes clearer in the examples that tax advisers frequently use. An Indian citizen working in the United States on H-1B status who has not visited India for the last two years and has not stayed in India for 365 days during the preceding four years will generally be a Non-Resident Individual for Indian income-tax purposes.

He does not meet the 182-day test because he did not stay in India during the relevant year. He also fails the alternate test because he lacks the required 365-day stay during the earlier four years.

A second example is more straightforward. An Indian citizen working in Canada who visits India for 45 days during FY 2025–26 and has been living outside India for employment for several years will generally remain non-resident for AY 2026–27, since a 45-day stay falls short of both the 182-day threshold and the ordinary 60-day threshold.

A third example requires closer analysis. An Indian citizen living abroad who visits India for 130 days during FY 2025–26 and has Indian income exceeding ₹15 lakh, excluding foreign-source income, may fall within the special 120-day rule introduced after the Finance Act, 2020 amendments.

That case cannot be resolved by looking at the 182-day test alone. The individual’s day count, income level and any interaction with section 6 and the deemed resident provision need to be examined together.

Confusion often deepens because the term NRI does not carry the same meaning under every Indian law. Under the Income-tax Act, the question is whether an individual is resident or non-resident under section 6; for banking and foreign exchange matters such as NRE accounts, NRO accounts and FCNR(B) deposits, the relevant framework comes from FEMA and RBI regulations.

A person may be a Non-Resident Individual for income-tax purposes and also a person resident outside India for FEMA purposes. Those positions often line up in ordinary employment-abroad cases, but the tests are not identical, which is why immigration status, tax status and banking status cannot be treated as interchangeable.

That point matters to H-1B workers in particular. An Indian citizen in the United States on H-1B may generally qualify as an NRI for Indian banking purposes if he is residing outside India for employment, while his tax status still depends on days spent in India during the relevant financial year and the preceding years.

Residential status determines the scope of income taxable in India. A resident individual may be taxable in India on global income, subject to applicable law and treaty relief, while a non-resident individual is generally taxable only on income received or deemed to be received in India, or income that accrues, arises or is deemed to accrue or arise in India.

That is why foreign salary for services rendered outside India is generally not taxable in India for NRIs merely because the person is an Indian citizen. Indian-source income remains within the tax net and can include rental income from property in India, capital gains from the sale of Indian property, interest from NRO bank deposits, dividends from Indian companies, income from a business connection in India, and pension or salary received in India depending on the facts.

A non-resident may still need to file an Indian return if taxable income in India exceeds the basic exemption limit or if filing is otherwise required under the law. The choice of return form depends on the nature of income: ITR-2 commonly applies where the non-resident has salary, house property, capital gains or income from other sources but no business or professional income, while ITR-3 applies where business or professional income is involved.

Tax records also matter. Non-residents reviewing an Indian filing position are expected to check Form 26AS, AIS and TIS, because entries may appear there from banks, tenants, property buyers, brokers or other deductors even when the individual assumes there is little or no Indian tax exposure.

For AY 2026–27, non-resident individuals are taxed at the applicable slab rates under the old or new regime, as applicable. The new tax regime under section 115BAC is the default regime, and under the old regime the higher basic exemption limit available to resident senior citizens and resident super senior citizens does not extend to non-residents.

Banking products add another layer. FCNR(B), or Foreign Currency Non-Resident Bank deposits, are available to eligible NRIs, OCIs and PIOs and are maintained in foreign currency; an Indian citizen working abroad and resident outside India for employment may generally be eligible to open one, subject to bank KYC and RBI or FEMA rules.

Interest on FCNR(B) deposits is generally exempt from income tax in India for eligible non-residents and persons who are resident but not ordinarily resident. That Indian exemption does not settle tax treatment abroad, and a U.S. citizen, green card holder or U.S. tax resident may still need to report that interest in the United States.

Indian citizens in the United States can therefore end up non-resident under Indian tax law while resident under U.S. tax law. A person on H-1B may become a U.S. tax resident under the substantial presence test, and a green card holder is generally treated as a U.S. tax resident unless a specific exception applies, pulling worldwide income and foreign account reporting into view.

Common errors follow a familiar pattern. Indians abroad often assume that visa status alone decides Indian tax status, that skipping an Indian return means there is no liability in India, that NRI banking status and income-tax residence always match, or that FCNR(B) or NRE interest is tax-free everywhere once it is exempt in India.

Each tax year turns on a narrower set of facts: the number of days in India during FY 2025–26, the aggregate stay during the four immediately preceding previous years, whether the person left India for employment abroad or visited as an Indian citizen or person of Indian origin, whether Indian income excluding foreign-source income crossed ₹15 lakh, and whether Indian income such as rent, bank interest or capital gains triggered filing duties.

That makes record-keeping central for NRIs, H-1B workers and other Indians abroad assessing their position for Assessment Year 2026–27. The law allows non-resident treatment in many ordinary employment-abroad cases, but the day-count tests, the ₹15 lakh income threshold and the interaction between the Income-tax Act, FEMA rules and foreign tax systems leave little room for guesswork.