India’s Income Tax Department has issued updated guidance explaining how the Income Tax Act, 2025 applies when determining the residential status of NRIs and other Indian citizens living abroad.
For tax years beginning on or after April 1, 2026, residential status will be determined under the Income Tax Act, 2025. Tax years beginning before that date will continue to be governed by the Income Tax Act, 1961, even if an assessment or reassessment takes place after the new legislation has commenced.
The department also clarified that the deemed-residency provision has been retained. Under this rule, an Indian citizen with total income exceeding *₹15 lakh—excluding income from foreign sources—*may be considered a deemed resident if that individual is not liable to tax in another country because of domicile, residence or a similar criterion. The person’s number of days in India is not relevant when this specific provision applies.
The criteria for “Not Ordinarily Resident” status have not materially changed. An individual may qualify if they were a non-resident in nine of the previous 10 years or stayed in India for 729 days or less during the preceding seven years.
The principal NRI tax concessions have also been continued. These include specified rates on qualifying investment income and long-term capital gains, as well as a limited return-filing exemption where an NRI’s income consists only of eligible investment income or long-term capital gains and the required tax has been deducted at source.
The updated FAQ provides clarification on the transition between the two tax laws. It does not announce a new NRI tax exemption or a general relaxation of residency requirements.
