Managing Tax Residency in Times of Conflict — A Note for Non-Resident Indians
Global conflicts have always prompted movement of people across borders. The ongoing tensions in the Middle East, and increasing uncertainty even in traditionally stable jurisdictions such as the UAE, are prompting a number of expatriates to temporarily relocate or extend their stays elsewhere until the situation stabilises. An unintended consequence of this movement is the potential impact on tax residency. Individuals may inadvertently lose their non-resident status in the UAE or, more critically, trigger tax residency in another jurisdiction. This risk is particularly relevant for those choosing to spend extended periods in India during this period, particularly with respect to FY 2025–26.
Under the Indian Income-tax Act, 1961, individuals are classified into three categories: Resident, Non-Resident, and Resident but Not Ordinarily Resident (RNOR). Residency is determined through a clear hierarchy of tests. An individual is treated as a Resident if they are present in India for 182 days or more during the relevant previous year, or if they are present in India for 60 days or more during the previous year and 365 days or more in aggregate over the preceding four years. To maintain non-resident status, an individual must therefore stay below 182 days in the relevant year and avoid breaching the 60-day plus 365-day combined threshold.
The law provides important exceptions which become highly relevant in the current context. For individuals leaving India for employment or business abroad, the 60-day threshold is replaced with 182 days in the year of departure. Similarly, for Indian citizens or Persons of Indian Origin (PIOs) visiting India, the 60-day threshold is substituted with 182 days, effectively meaning that most non-resident Indians can retain their non-resident status as long as their stay does not exceed 182 days during the year. A recent ruling by the Bengaluru Income Tax Appellate Tribunal has held that this substitution applies only to non-residents visiting India and not otherwise, a position that, while subject to further appellate proceedings, adds a layer of caution to this analysis.
This position tightens further where Indian-source income is significant. For Indian citizens or PIOs whose total income, other than income from foreign sources, exceeds Rs 15 lakh, the 60-day threshold is extended to 120 days rather than 182 days. Crossing 120 days can trigger residency in such cases, and the individual may be classified as RNOR rather than a full Resident, particularly where their income is not subject to tax in any other jurisdiction. Importantly, RNOR status, while technically a form of residency, carries a significant benefit: income from foreign sources remains exempt from Indian taxation, placing such individuals in a position broadly similar to non-residents for most practical purposes. Individuals with Indian-source income exceeding Rs 15 lakh should therefore aim to keep their stay below 120 days. Others should, at a minimum, ensure they remain below the 182-day threshold.
A further nuance arises for individuals who have spent 365 days or more in India during the preceding four years. In such cases, even a stay exceeding 60 days in the current year can trigger residency. This is frequently overlooked and becomes a trap for those making repeated visits over successive years. From a FEMA perspective as well, individuals who have not clearly established non-resident status in earlier years need to exercise additional caution, as overlapping interpretations between FEMA and tax residency can create significant further exposure , including reclassification of bank accounts and reporting obligations in respect of foreign assets.
Individuals crossing borders during this period, whether staying in India or other jurisdictions for extended durations, should carry out a self-audit or seek professional advice to review their day-count in each jurisdiction and its potential impact on their tax residency position for FY 2025–26. Decisions made in times of uncertainty should not generate uncertain tax outcomes.
For the benefit of our readers, we have created a self-assessment tool that will help you determine your tax residency status from an Indian perspective. While we have taken care to ensure that this tool is accurate and up to date, please do remember that no automated tool can fully replace professional advice , tax residency is ultimately a question of facts, and small details in your specific situation can change the outcome. Use this tool to understand where you stand and to ask better questions of your advisor. If your result shows any risk of triggering residency in India, treat that as a prompt to act before 31 March 2026, not after.