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Returning to India does not create one permanent tax status. You must determine your residential status separately for each Indian financial year, apply the law in force for that year, classify yourself as resident, resident but not ordinarily resident (RNOR), or non-resident, and then review each foreign salary, equity award, account and property under the correct reporting rules. Income-tax residency and FEMA residence are separate analyses, so your tax label alone does not tell you how to treat an NRE account.
Use a four-part method for every financial year
Work through your return in this order:
- Identify the financial year and governing law. The year beginning before 1 April 2026 is governed by the Income-tax Act, 1961. The year beginning on or after 1 April 2026 is governed by the Income-tax Act, 2025.
- Count your days in India and apply the exceptions. Use actual arrival and departure dates, not a rough month count.
- Classify the result. If you are resident, test whether you are RNOR; otherwise you are non-resident for that year.
- Map every item of income and asset. Salary, RSUs, brokerage holdings, retirement plans, bank accounts and property can each have different source, receipt, timing and reporting questions.
This sequence prevents a common error: deciding that a move-back date automatically makes all later foreign income taxable in India, or that a non-taxable item never needs disclosure.
Apply the correct Act to the correct tax year
Indian financial years run from 1 April through 31 March. A stay that crosses 31 March is split between two tax years; it is not treated as one continuous “return year.” The Income Tax Department states that “Residential status for any tax year beginning before 1 April 2026 will continue to be determined under section 6 of the Income Tax Act, 1961, even if the assessment or reassessment takes place after the commencement of the Income Tax Act, 2025.” It separately states that residential status under the 2025 Act applies only to tax years beginning on or after 1 April 2026.
| Financial year | Residency law | Practical treatment |
|---|---|---|
| FY 2025–26 | Income-tax Act, 1961 | Count days and apply the 1961 Act for 1 April 2025–31 March 2026. |
| FY 2026–27 and later | Income-tax Act, 2025 | Apply the 2025 Act to each year beginning on or after 1 April 2026. |
For example, someone who returns in February 2026 must determine status for the remaining part of FY 2025–26 under the 1961 Act and then start a new calculation for FY 2026–27 under the 2025 Act. Earlier Indian-day history can still feed the lookback tests in the later year.
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Count India days and test the exceptions
The Department’s current residency guidance describes two ordinary individual tests. You are resident if you satisfy either the 182-day test for the relevant year, or the 60-day test in that year together with at least 365 days in India during the preceding four years. These are starting points, not a universal “182 days is safe” rule: statutory exceptions and special categories can change the applicable threshold.
Ordinary tests
- 182-day test: at least 182 days in India during the relevant financial year.
- 60-plus-365 test: at least 60 days in India during the relevant year and at least 365 days during the four preceding years.
Special thresholds and deemed residence
The Department describes a modified 120-day relevant-year threshold for certain visiting Indian citizens or persons of Indian origin whose specified income exceeds ₹15 lakh. The complete statutory definition of income and all conditions must be checked against your facts; do not apply 120 days simply because you hold an Indian passport or OCI status.
The guidance also describes deemed residence for an Indian citizen above the specified income threshold who is not liable to tax in another country because of residence or a similar criterion. This rule addresses a gap in which a person could otherwise be resident nowhere. Whether it applies depends on the statutory conditions and your residence position in the other country.
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Prepare a day-by-day schedule for each financial year. Reconcile passport stamps with airline itineraries, immigration records, work travel calendars and leave records. Record the date you enter India and the date you leave; keep the same convention throughout the calculation. Also calculate the preceding four-year total, and preserve the longer history needed for RNOR tests.
After “resident,” test for RNOR
Residential status has three practical outcomes: non-resident, resident and ordinarily resident, or resident but not ordinarily resident. RNOR is not an optional label and is not granted merely because you have just returned from abroad.
The Department describes two alternative RNOR tests: non-residence in nine of the ten preceding years, or presence in India for no more than 729 days in the seven preceding years. Test both alternatives using your historical day counts and the relevant statutory wording. The lookback remains important when you move from a year governed by the 1961 Act to one governed by the 2025 Act.
| Status | How it is reached | Why it matters |
|---|---|---|
| Non-resident | You do not meet the resident tests for that financial year. | Indian tax analysis generally centers on income received in India or accruing or arising from India, subject to the applicable provisions and treaty. |
| Resident but not ordinarily resident (RNOR) | You are resident but satisfy an RNOR condition, including the nine-of-ten-years or 729-days-in-seven-years alternatives described by the Department. | The scope of foreign-income taxation is narrower than for an ordinarily resident person, and the Department’s guide says Schedule FA need not be completed for an RNOR. |
| Resident and ordinarily resident | You are resident and do not meet an RNOR condition. | Foreign income and foreign-asset reporting require the broadest review under the applicable rules. |
Keep the status result separate from the income result. Being RNOR does not automatically exempt every foreign payment, and being non-resident does not make an India-related payment irrelevant. Source, receipt, services performed, vesting and treaty provisions still have to be examined item by item.
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Salary from a foreign employer
The employer’s country and the currency of payment do not, by themselves, settle Indian taxability. Create a timeline showing where you performed the work, when the salary was earned, when it was paid, and which country withheld tax. A salary earned for services performed after you begin working from India may raise Indian-source and payroll questions even when the employer remains overseas. A payment for work performed before your move can require a different analysis.
Separate regular salary, bonuses, relocation payments, severance and deferred compensation. Keep employment contracts, payslips, withholding certificates, travel calendars and the employer’s year-end statement. If two countries tax the same income, treaty relief and foreign-tax-credit procedures may be available, but eligibility and timing depend on the treaty country and the tax actually paid.
RSUs, stock options and other equity awards
Do not treat an RSU as a single event. Preserve the grant date, vesting date, number of shares, fair value used by the employer, payroll withholding, sale date, sale proceeds and brokerage fees. The service period connected with the award and where you worked during that period can affect sourcing; the later sale can create a separate capital-gain calculation. No single universal rule for equity awards is established, so obtain country-specific advice before filing.
Foreign brokerage, dividends and interest
List dividends, interest, distributions, realized gains and unrealized holdings separately. Statements often report a calendar year while Indian returns follow a financial year, so reconcile January–December statements to the 1 April–31 March return period. Keep the foreign tax withheld and proof of payment if you intend to claim relief.
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Foreign pensions, 401(k)-type plans, individual retirement arrangements and similar accounts can have timing and treaty issues that are not resolved by their local “retirement” label. Record contributions, employer contributions, withdrawals, distributions and account value. For overseas real estate, track ownership, rent, expenses, mortgage interest, sale dates and acquisition cost. Indian reporting and the foreign country’s rules may use different valuation and tax years.
Understand Schedule FA, FSI and TR
Income taxation and asset disclosure are separate. The Department’s Schedule FA guide covers foreign assets and accounts held at any time in the relevant calendar year ending 31 December. It includes overseas depositary and custodial accounts, equity or debt interests, insurance or annuity contracts, financial interests, real property, other capital assets, signing-authority accounts, trusts and foreign-source income.
The guide says a resident must disclose qualifying foreign assets or accounts when the taxpayer is the legal owner, beneficial owner or beneficiary. It also states: “Schedule FA need not be completed if the taxpayer is classified as ‘not ordinarily resident’ or a ‘non-resident.’” That exemption from Schedule FA does not erase tax on Indian-source income or remove other schedules that may apply.
Schedule FSI is used for foreign-source income, while Schedule TR summarizes foreign-tax relief. A nil Indian tax bill does not prove that there is no reporting obligation: an account may need disclosure even when it produced no interest, or a credit may be relevant even when the final Indian liability is zero.
Choose an ITR form that contains the required schedules
The Department’s filing brochure says ITR-1 and ITR-4 do not contain Schedules FA, FSI or TR. If your facts require any of those schedules, do not select a simplified form merely because your salary is straightforward. Use the return form applicable to your income profile and the current assessment year, and verify that it provides every schedule you need.
Form rules can change by tax year. Before filing, check the current e-filing instructions for foreign assets, foreign income, capital gains, business or professional income and foreign-tax credit. Keep copies of the submitted return, schedules, acknowledgements and supporting statements.
Run a separate FEMA and banking review
FEMA residence is not the same as income-tax residence. The Department’s FAQ says the NRE-interest exemption condition is tied to FEMA’s definition of a “person resident outside India” or to permission from the Reserve Bank of India, not simply to the income-tax label.
When you return, contact your bank about the treatment of NRE, NRO and other accounts and verify the current FEMA requirements. Ask what account redesignation, documentation, interest treatment and remittance steps apply to your circumstances. Do not wait for an income-tax notice to discover that a bank account needed a FEMA update. The fact that you are RNOR for income-tax purposes does not, by itself, authorize continued NRE treatment.
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Suppose you return on 15 February 2026 after several years abroad. Your FY 2025–26 calculation covers 1 April 2025 through 31 March 2026 and uses the 1961 Act. Your FY 2026–27 calculation starts on 1 April 2026 and uses the 2025 Act. For FY 2025–26, count all India days, test the applicable exceptions and determine whether you are non-resident or resident. For FY 2026–27, start a new day count, then use your preceding-year history in the relevant resident and RNOR tests. Salary earned before and after 15 February, RSUs vesting in each period, and foreign accounts held on 31 December 2026 must be mapped to the appropriate year and status.
Records to assemble before filing
This is a practical working file, not a universal government-mandated list. Assemble:
- Passport pages, immigration records, flight itineraries and a seven- and ten-year India-day schedule.
- Employment contracts, payroll statements, bonus letters, equity-grant and vesting statements, and employer withholding certificates.
- Foreign bank, brokerage, custodial, insurance and retirement statements, including account numbers and year-end or transaction data.
- Property deeds, ownership or beneficiary records, rental statements, acquisition costs and sale documents.
- Foreign tax returns, assessment notices, payment receipts and treaty-country details.
- Indian bank statements showing receipts, remittances and any NRE or NRO redesignation.
Common mistakes and how to correct them
Using the calendar year instead of the Indian financial year
Correct the analysis to 1 April–31 March, then reconcile foreign calendar-year statements to that period.
Counting only the move-back year
Rebuild the preceding four-year, seven-year and ten-year histories needed for the resident and RNOR tests.
Assuming RNOR is automatic
Document the statutory RNOR test you satisfy; do not rely on the number of years spent abroad as a rough approximation.
Ignoring foreign assets because tax is zero
Review Schedule FA eligibility independently from tax payable, including legal-owner, beneficial-owner and beneficiary relationships.
Filing ITR-1 or ITR-4 with foreign schedules missing
Check the current form’s schedule list before submitting and select a form that supports FA, FSI and TR when required.
Treating FEMA status as an income-tax result
Ask the bank and verify current FEMA rules for NRE treatment; an income-tax RNOR or non-resident result does not answer that banking question.
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When to obtain individual advice
Get cross-border tax advice when your move spans 31 March 2026, you worked in multiple countries, your compensation includes unvested or recently vested equity, you hold foreign retirement plans or trusts, you are claiming treaty relief, you have signing authority over another person’s account, or your residency result depends on the deemed-resident or 120-day rules. Those outcomes depend on citizenship, arrival and departure dates, prior India days, source and receipt of income, acquisition dates, treaty wording and FEMA facts that a general article cannot determine.
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