income tax
Published on 29 May 2025
Key Changes in NRI and PIO Rules: Pre- and Post-2020/2025 Comparison
Individual Residency: Core Tests and Recent Modifications
Basic Thresholds (Section 6(1))
An individual qualifies as a resident if available or present in India for: • ≥182 days in the relevant previous year, or • ≥60 days in the relevant year and ≥365 days over the preceding four years.
Deemed Residency and RNOR Classification
Deemed Residency (Section 6(1A))
This provision targets tax avoidance by stateless individuals. An Indian citizen earning >₹15 lakh from Indian sources and not liable to tax in any other jurisdiction is deemed a resident if present in India for: • ≥120 days in the relevant previous year and • ≥365 days over the four preceding years. These individuals are automatically classified as RNOR, limiting their tax liability to Indian-sourced income.
Special Relaxations for NRIs and Clarifications in 2025
A significant carve-out applies to Indian citizens leaving for employment abroad or as crew on Indian ships. For these individuals, the 182-day threshold applies instead of the reduced 60/120-day criteria. The 2025 amendment provides clarity by restricting this relief to salaried employment, explicitly excluding freelancers, job seekers, and self-employed professionals.
Firms, AOPs, and BOIs (Section 6(2))
- Resident: Control and management of affairs are wholly or partly in India.
- Non-resident: Control and management are entirely outside India.
HUFs are treated as resident if their control and management are within India. For RNOR classification, the Karta must have either:
- Been non-resident in 9 of the last 10 years, or
- Spent ≤729 days in India in the previous 7 years.
This dual test ensures alignment with individual residency parameters.
Rule Comparison: Pre- and Post-2020/2025
The following table outlines the key differences in rules applicable to Non-Resident Indians (NRIs), Persons of Indian Origin (PIOs), and other entities before and after the changes implemented in 2020 and projected for 2025.
| Criteria | Pre-2020 Rule | Post-2020/2025 Rule |
|---|---|---|
| 60-day rule for NRIs/PIOs | 60 days | 120 days if income exceeds ₹15 lakh; otherwise 182 days for employment abroad |
| Deemed Resident | Not applicable | Indian citizens with income over ₹15 lakh and a stay of 120 days in India |
| RNOR for Individuals/HUFs | 9/10 years or 729 days | Remains unchanged |
| Company Residency (POEM) | Introduced in 2016 | No changes |
| HUF RNOR Status | Determined by Karta’s years/days in India | Based on Karta’s status along with control/management |
This comparison clarifies the significant updates and existing rules concerning residential status and taxation for Indian citizens and entities.
Tax Exposure by Residency Classification
- Ordinary Residents are taxed on global income, including income earned and accrued outside India.
- RNORs and Non-Residents are taxed only on income sourced in India and foreign business income controlled from India.
- Deemed Residents—classified as RNOR—face the same limited tax exposure.
Clarifications Through FAQs
Q: Is the 60-day rule still applicable to NRIs?
- A: No. For Indian citizens or PIOs earning >₹15 lakh, the threshold becomes 120 days. For those employed abroad, the standard 182-day rule applies.
Q: Who qualifies as a deemed resident?
- A: An Indian citizen earning >₹15 lakh from Indian sources, not taxed elsewhere, and staying in India ≥120 days in the relevant year.