182 Days Tax Rule in India for NRIs

Non-resident Indians are people who live outside India for various reasons, such as better education, career opportunities, and financial growth.

NRI status under the Income Tax Act of 1961 is considered an Indian who can be a resident, NRI, and RNOR on the basis days they have lived in India. 

The Indian residents are taxed on their global income as well as their Indian income, but the NRIs are only taxed on the income that they earn in India or receive in India.

In this blog, we will going to see the 182-day tax rule of the NRIs and how we calculate the 182-day rule for NRIs. 

Who is an NRI? 

An NRI is a person who lives in a foreign country for education, financial or career opportunity, but is legally considered an Indian citizen. As non-resident Indians live in a foreign country, they are also Overseas Indians.

For the NRIs living in India, the Foreign Exchange Management Act, 1999, and the Indian Tax Act made some rules that decided who is eligible for the NRI tax and legal purposes in India. 

An NRI who stays outside India for various reasons like business, employment, engagements, or for any other purpose outside India, then the designation implication on their tax liabilities and financial matters is in India, which can also impact their eligibility criteria to open an NRE account, NRO account, and FCNR accounts along with the Indian taxation. 

The simple meaning of an NRI under the FEMA is defined by the Indian Income Tax Act, which also sets the duration of an individual living in India during a financial year. This will help to see the clarification between an NRI and a resident under the FEMA classification according to the Income Tax Act. 

The status of an NRI is defined by the number of days they have spent in India during a financial year, which is from April 13 to March 31 under the Income Tax Act of India.

182 Days Rule in India

The residential status of a Non-resident Indian (NRI) is determined by the number of days they have spent in India in the current financial year and in the last 10 previous financial years. 

Here are some of the rules and regulations given below, with the condition that will help you to know about the qualification for Non-resident India. 

• If an individual stays for more than 182 days or more in a financial year, and stays in India for more than 60 days during the financial year and spends more than 365 days or more in the last 4 years the they will be considered as a Indian resident. 
• If an individual who is getting more than 15 lakhs INR Indian income apart from the foreign income sources in the country, then they will be considered as a deemed person. If such a person is not taxed in any country due to their residency status, then they will be considered a Tax resident. 
• When an Indian citizen is travelling in a foreign country, the 60-day requirements are extended to 182 days. Along with it, an individual who is an Indian citizen or an Indian origin person residing outside India, and has an Income of more than 15 lakh INR, then the 60 days will be replaced with 120 days, and If their Indian income apart from foreign income sources are less then 15 lakhs INR, then their 60 days will be extended to 182 days. 
• The new rules, which are deemed residency rule and the 120-day rule, will take effect from the financial year 2020-21. 

Note: According to the new Income tax bill, the term which is used "for employment outside India" is changed to "for employment outside India". This will result in job seekers, freelancers, professionals, and self-employed individuals who will not be able to take advantage of their relaxed residency.

Benefits for the NRIs in India

Given below are some of the benefits of a Non-resident Indian who is in India: 

• NRI Quota benefits: As an NRI, you can take advantage of the NRI quota, in which the government provides separate seats for the NRIs, like as engineering, medicine, law, management, and in many educational institutions. 
• Government Reservations: The government provides some reserved seats for the NRIs in the important polity of the country. 
• Right to Vote: As an NRI, you also get the right to vote in the democratic process of India, where you can also choose your leader by voting in the local, state, and national elections in the country. 
• Tax Benefits: Non-resident Indians have many tax benefits in India, which allow them to claim deductions similar to Indian residents, which are life insurance premiums, Investment in ELSS up to 1.5 lakh, tuition fees for the children, and major deductions under sections 80G, 80D, 54EC, 80TTA, and 54. 
• Purchasing Property: A Non-Resident Indian can buy property in India by following all the guidelines of the Foreign Exchange Management Act (FEMA) regulations. 

How are 182 Days Calculated for the NRIs?

For the calculation of 182 days in India as an NRI, you need to add all the days that you have spent in India during a financial year, make sure you also include your arrival and departure days. 

Let's understand it with an example, imagine that you have arrived in India on July 1, 2023 and departed on December 31, 2023. The number of days that you have spent in India is 184 days, and now that you have stayed in India for more than 182 days, you will be considered an Indian resident, and you will be taxed according to the Income Tax laws in India. 

Also Want to Know About Taxation on Indian Rental Income for NRIs Check Now!

Why is it Necessary to Determine the Residency Status? 

Determining the residency status is crucial for taxation in India. An individual who is considered to be Non-Resident (NR) needs to pay tax on the income which they received in India or that they earn in India, or deemed to arise in India.

Additionally, there are different taxation rules for the different types of income sources for the NR, which can be income from any unlisted securities or from any dividend income. 

Knowing the residential status is very important for the tax implications in India. If you are a resident, then you need to pay the taxes on your Indian income as well as on your global income, but if you are considered an NR, then you are only liable to pay the tax in India, or the income that you are deemed to arise in India or received in India. So by knowing your residency status, you can avoid getting any tax liabilities or any discrepancies. 

If you know your residency status, you can take advantage of various tax treaties between India and other countries which may replaces the provision of the income tax laws which are related to the residential status and income taxation, like the Double Taxation Avoidance Agreement (DTAA), which helps the individual to pay the tax twice on the same income in two different countries and prevents you from facing double taxation. 

The income tax laws also outline the method for determining the resident status of firms and companies in India. A company's residence is determined through the place of its incorporation, whereas the residential status of the firm is determined through where it has been controlled and managed. 

The residency status of an individual is determined by the number of days he or she has spent in India during a financial year. The residency eligibility determines whether an individual is an Indian resident or an Indian origin. The non-residents are taxed on only the Indian source income which they get in India or is deemed ot arise or be received in India. 

Final Thoughts 

An NRI status is determined in India through the number of days which he has spent in India in a financial year. This helps to determine the tax implications for an NRI in India. An NRI is considered to be a resident if they have spent more than 182 days or more in a financial year. 

With the help of Visament, you can take several advantages as an Indian resident and manage all your foreign income and taxation in India. 

For more information about the NRI tax implications after becoming an Indian resident, you can contact the experts who are ready to help you with your problem and queries 24/7.