NRI status & Taxable Income in India effective from FY2020-21

For non-resident Indians (Indian citizens or Persons of Indian Origin (‘PIO’) who have been residing outside India), until March 31, 2020, NRIs who visited India could stay in India up to 181 days in a financial year and still could maintain “Non-resident” status in India.

The Finance Act, 2020 and the Finance Act 2021 (assented by the President on 28 March 2021) have made far-reaching changes regarding the determination of the residential status of NRIs for the financial year ended March 31, 2021, and March 31, 2022. This change will directly impact the NRI community.


⦁ Visiting NRIs whose total income (which is defined as taxable income) in India is up to Rs 15 lakh during the financial year will continue to remain NRIs if the stay does not exceed 181 days, as was the case earlier.

⦁ Dividends distributed by Indian companies would be taxable in the hands of the shareholders and as such, would form part of the taxable income. On the other hand, since interest on FCNR and NRE deposits are exempt it will not form a part of taxable income. This amendment is effective from the financial year 2020-21, viz. April 1, 2020, to March 31, 2021.

[pt_view id=”baa39696xe”]

⦁ An individual whose taxable income exceeds Rs 15 lakh and stays in India for 120 days or more (but less than 182 days) and is treated as a resident individual will still be treated as “Resident but Not Ordinarily Resident (RNOR)”. In the case of RNOR individuals, the foreign income (i.e., income accrued outside India) shall not be taxable in India. Foreign sources mean income that accrues or arises outside India (except income derived from a business controlled in or a profession set up in

Scope of taxation in India based on Residential Status

1ROR – Resident and Ordinarily Resident,
RNOR – Resident and Not Ordinarily Resident and
NR – Non-Resident

Way forward :

NRIs need to carefully consider the total Indian income and plan their travel itinerary based on the amendment for their period of stay.

The Finance Ministry distributes Rs 13,386 crore to 25 states as an RLB award.

The positive aspect is that in most cases, NRIs can continue to visit India for up to 181 days in the financial year and even in other cases where the period of stay in India is 120 days up to 181 days (and also for 365 days or more in preceding 4 years) or more or in case of Indian citizens who are not tax residents of any other country and are deemed to be tax residents of India, the status would be RNOR (if their Indian Income exceeds INR 15 lakhs) and hence foreign income shall not be taxable in India.