Tax Residency Rules for NRIs & UHNIs: What Changed and What You Should Do?

If you're an NRI (Non-Resident Indian) or a UHNI (Ultra High Net-Worth Individual), tax planning has always required a clear understanding of India’s complex tax laws. But recent amendments to the tax residency rules have brought significant changes that could impact your global income, investment decisions, and even lifestyle.

In this guide, we break down the revised tax residency rules, what they mean for NRIs and UHNIs in 2025, and the smart steps you should consider to stay compliant and tax-efficient.

What Is Tax Residency and Why It Matters?

Your tax residency status determines whether your global income is taxable in India. If you're classified as a resident, you must report and pay tax on your worldwide income in India. If you're a non-resident, only your Indian-sourced income is taxable.

The classification is based on:

• Your physical stay in India during the financial year
• Your past stay history
• Your sources of income and ties to India

For NRIs and UHNIs, especially those who travel frequently or hold business interests globally, this becomes a critical piece of financial planning.

What Has Changed in the Tax Rules for NRIs & UHNIs?

1. Stricter Criteria for Determining Residency

Earlier, an individual was considered a resident if they spent 182 days or more in India in a financial year. That threshold has now been reduced to 120 days for certain categories of taxpayers, particularly those whose Indian-sourced income exceeds ₹15 lakh during the financial year.

This means even a shorter stay in India could now classify you as a Resident but Not Ordinarily Resident (RNOR).

2. Deemed Residency for High-Earning NRIs

If you:

• Are not liable to pay tax in any other country or jurisdiction, and

• Have total income (excluding foreign income) exceeding ₹15 lakh in India,

Then you may be deemed a resident of India even if you don't meet the physical presence criteria. This primarily targets high-income UHNIs who reside in tax havens or low-tax countries.

3. More Reporting, More Transparency

India is also aligning with global tax reporting standards like the Common Reporting Standard (CRS) and FATCA. As an NRI or UHNI, your offshore income, bank accounts, and asset holdings may be visible to Indian tax authorities through information exchange agreements.

What NRIs & UHNIs Should Do in 2025?

1. Track Your Days in India

Maintain a precise log of your visits to India. Even short personal visits could unintentionally alter your residency status under the revised rules.

2. Review Your Income Threshold

If your Indian-sourced income is close to or exceeds ₹15 lakh in a financial year, assess whether the new rules could reclassify you as a resident.

3. Consider RNOR Status Benefits

If you become a resident but not an ordinary resident, your foreign income may still remain exempt from Indian taxation for a limited time. Use this window to restructure your finances wisely.

4. Avoid Falling into Deemed Residency

If you are based in a tax haven or are not filing tax returns in another country, speak to a tax advisor. Being labeled as a deemed resident can lead to full global taxation in India.

5. Seek Double Tax Avoidance Agreement (DTAA) Relief

Many NRIs qualify for tax relief under India’s DTAA with their country of residence. Ensure you file proper documentation, including Form 10F and a Tax Residency Certificate (TRC), to avoid double taxation.

Real-World Example

Rohit, an Indian-origin entrepreneur based in Dubai, made frequent trips to India for family and business, totaling 135 days in FY 2024-25. His Indian income from rent and dividends was ₹18 lakh.

Under the older rules, Rohit would have been a non-resident. But now, he may be considered a resident but not an ordinary resident and liable to report foreign assets if he crosses the RNOR benefit period.

Conclusion: Time to Rethink Your Tax Strategy

The tax landscape for NRIs and UHNIs has evolved, and ignorance is no longer an excuse. With tighter scrutiny, lower day thresholds, and deeper global reporting, staying compliant means staying informed.

Whether you're earning rent from Indian property, running a global business, or investing in Indian markets, consult a professional and revisit your residency and tax planning strategy for 2025. The stakes are too high to leave it to chance.

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Common Questions NRIs and UHNIs Are Asking

• How many days can I stay in India without becoming a tax resident?

If your Indian income is below ₹15 lakh, you can stay up to 181 days. If it exceeds ₹15 lakh, the threshold drops to 119 days for non-residency.

• I am a citizen of India but live in a tax-free country. Will I be taxed in India?

Yes, you may be deemed a resident under the new rules, especially if you’re not taxed elsewhere and earn more than ₹15 lakh from India.

• What if I get classified as RNOR?

RNORs don’t have to pay tax on foreign income for a few years. But this status is temporary. Plan ahead before the exemption window closes.