NRI tax guide: Returning to India? Here's exactly when the tax department starts taxing your foreign income

Every rupee of global income becomes taxable once you officially become a Resident and Ordinarily Resident (ROR). But there's a buffer — understanding when your NRI status ends is the first step to protecting your money.

The key question: how many days have you spent in India this fiscal year?

You retain NRI status if you stay in India for fewer than 182 days in a fiscal year. But since April 2020, if your Indian income exceeds ₹15 lakh, that threshold drops sharply.

Indian income below ₹15L
181 days

Indian income above ₹15L
119 days

Pro tip: Return after October to stay under the 182-day limit for that fiscal year.

Most returning NRIs don't jump straight to full resident taxation. You likely qualify as Resident but Not Ordinarily Resident (RNOR) first — which means your foreign income remains untaxed, just like when you were an NRI.

You qualify as RNOR if you were an NRI in 9 of the last 10 years, or spent no more than 729 days in India over the preceding 7 years.

After your RNOR window closes, you become a Resident and Ordinarily Resident (ROR). At this point, your worldwide income — foreign salary, interest, rent, capital gains — is taxed at Indian income tax slab rates.

DTAA (Double Taxation Avoidance Agreement) can help you claim credit for tax already paid abroad.

RBI rules require you to notify your bank immediately upon returning. Failing to do so is a FEMA violation and attracts penalties. Here's what happens to each account type:

NRE/NRO accounts: Convert to resident savings accounts
NRE FDs: Become domestic FDs; interest becomes taxable per your slab
FCNR deposits: Can be held till maturity, then convert to RFC or rupee account
RFC accounts: Interest stays tax-free while you're RNOR

Your investment accounts require changes at the point of return:

• Mutual funds: Inform your bank/fund house of your new resident status
• Stocks: Close your PIS (Portfolio Investment Scheme) account and open a standard demat + trading account
• Foreign assets: Must be disclosed annually in Schedule FA of your Indian ITR
• Insurance: Overseas policies won't cover you in India; buy fresh health and life cover

Smart timing and planning during your RNOR window can make a material difference to your tax outgo:

• Sell foreign assets while still RNOR: Capital gains won't be taxed in India yet
• Receive large foreign income before becoming ROR: Dividends, bonuses, deferred comp
• Re-assess your residency status every year: It can change based on your days in India
• Use DTAA proactively: Avoid paying full tax in both countries on the same income

Consult a CA or tax advisor who specialises in NRI repatriation before your first Indian ITR filing as a resident.