Coming home: the tax years that decide everything

Nobody moves home for tax reasons. People return for parents, for children, for the feeling of a life resumed. The tax consequences arrive anyway, and they arrive on a schedule. Here is the useful part: the schedule can be counted. Indian tax residence is built out of days and years, not impressions. If you can count, you can see your own position — ideally before the ticket is booked, because that is when the counting can still be changed.

A word on the law itself, first. The Income-tax Act, 2025 came into force on 1 April 2026 and governs Tax Year 2026-27 onwards. The Income-tax Act, 1961 still governs income earned up to 31 March 2026, and proceedings for those earlier years, under s.536(2)(c) of the 2025 Act. This article cites the new Act, with the old section in brackets at first mention where one exists.

To keep things concrete, follow one family through the rules. A couple in their fifties, Indian citizens, twenty years in the Gulf. One salary, savings in foreign deposits, a small portfolio of foreign shares, a flat in Kochi on rent. They visit Kerala for about three weeks each year. They plan to return for good in 2026.

How residence is counted

Residence is decided by s.6 of the Income-tax Act, 2025 (erstwhile s.6 of the 1961 Act). For an individual, the basic tests are in s.6(2), and both are about days. You are resident for a tax year — which runs from 1 April to 31 March — if you are in India for 182 days or more in that year. You are also resident if you are in India for 60 days or more in the year and, added up, 365 days or more across the four preceding years.

Days are days. Arrival days, departure days, days spent doing nothing at all — presence is what counts, not purpose.

The Act then softens the second test for people living abroad. An Indian citizen who leaves India for employment outside India, or as crew of an Indian ship, is not caught by the 60-day test at all — s.6(3). An Indian citizen, or a person of Indian origin, who merely visits India is also outside the 60-day test, unless their income apart from foreign income exceeds the specified threshold, in which case 60 days becomes 120 — s.6(4) and s.6(5). These carve-outs are why our family could spend three weeks a year in Kerala for twenty years without ever becoming resident.

On return, the softening falls away. The year you come back is the year the counting starts to bite.

Why the month you fly matters

Suppose the family lands on 1 July 2026. From 1 July to 31 March is 274 days. That is more than 182, so they are resident for the whole of Tax Year 2026-27.

Now suppose they land on 15 November 2026 instead. From then to 31 March is about 136 days — under 182, so the first test fails. The second test needs 365 days across the four preceding years; their short holidays add up to well under that, so it fails too. They are non-resident for 2026-27, even though they have moved home for good.

Same family, same money, same intentions. A four-month difference in the flight, and one entire tax year changes its character. For a family whose past visits were longer, the arithmetic can come out differently — which is exactly why the count has to be run on your dates, not someone else’s. But the principle holds. The month you fly is not a detail. It is one of the few levers you control completely.

The middle status

Between non-resident and full resident, the law keeps a middle room. A person can be resident in India and still “not ordinarily resident” — RNOR, in the shorthand you will have seen.

s.6(13) of the Income-tax Act, 2025 defines who qualifies. The limb that matters for most returnees is the first: you are not ordinarily resident for a tax year if you were non-resident in nine of the ten preceding tax years, or if you were in India for 729 days or less, in total, across the seven preceding tax years. There are two further limbs — one for visiting citizens who become resident on 120 to 181 days with income above the specified threshold, and one for citizens caught by the deemed-resident rule described below.

Notice what the tests look at: the past. Not your intentions, not your investments — your history of years and days. Anyone with the passport stamps can run them.

What the status is worth

Not ordinarily resident status carries one benefit. It sits in s.5 of the Income-tax Act, 2025 (erstwhile s.5), which sets the scope of what India taxes. A resident is taxed on income arising anywhere in the world. But for a person who is not ordinarily resident, s.5(1)(c) includes foreign income only where it is derived from a business controlled in India or a profession set up in India. Income from foreign sources — defined in s.6(14) as income accruing outside India, other than from such a business or profession — stays outside.

For the family, that means the interest on their Gulf deposits and the dividends and gains on their foreign shares sit outside Indian tax during those years. The rent from the Kochi flat, and interest on their Indian accounts, are taxable in India as always, at the rate in force. The status does not touch Indian income. It shelters foreign income, and only that.

That one sentence is why the status matters so much. The years in which foreign income sits outside Indian tax are the natural years in which to receive, reorganise or realise what was built abroad. Which moves to make, and in what order, is personal. But the window in which to make them is countable.

How long it lasts

Run the family’s numbers. They land on 1 July 2026 and are resident for 2026-27; the ten years before it were all non-resident years, so they are not ordinarily resident. In 2027-28, nine of the ten preceding years are still non-resident — the status holds. In 2028-29, only eight are, so the first limb fails; and their days across the seven preceding years — two full years in India plus the old holidays — are now past 729, so the second limb fails as well. From 2028-29 they are simply resident.

Two years, in this case. Some returnees get three, depending on the date of return and how much time they spent in India before it. Nobody keeps the status indefinitely, and nobody can renew it by staying put: every year in India erodes both tests. It is a corridor, not a destination.

The deemed-resident rule

One more rule belongs in the picture, because it reaches people before they return. Under s.6(7) of the Income-tax Act, 2025, an Indian citizen who is not liable to tax in any other country by reason of domicile or residence, and whose income apart from foreign income exceeds the specified threshold, is deemed to be resident in India — days or no days.

This is aimed at people who are resident nowhere, and it is most relevant to citizens of countries with no personal income tax, which includes much of the Gulf. The consequence is softened: a citizen deemed resident this way is treated as not ordinarily resident under s.6(13), so foreign income generally stays out of Indian tax even so. But the status is not nothing, and anyone in the Gulf with substantial Indian income should know where they stand before building a plan around the return.

The day the middle status ends

The first year of ordinary residence changes two things at once.

First, scope. Income arising anywhere in the world is now taxable in India at the rate in force. If another country also taxes some of it — a pension, say, or rent on a flat abroad — relief may be available under India’s tax treaties, given effect by s.159 of the Income-tax Act, 2025 (erstwhile s.90). Treaty relief is real, but it is claimed, not automatic, and every treaty is different.

Second, disclosure. Under s.263(1)(a)(ix) of the Income-tax Act, 2025, a resident who is not ordinarily resident is outside the provision — but a resident who is, and who at any time in the year holds any asset outside India as beneficial owner or otherwise, or has signing authority over any foreign account, or is a beneficiary of a foreign asset, must file a return for that year regardless of income. Even at nil income, the return is compulsory, and it discloses the foreign assets.

So for the family, 2028-29 is the year their foreign interest and gains become taxable in India, and the year a return must be filed simply because the foreign accounts exist. The disclosure asks for particulars that are slow to assemble from abroad — dates, costs, statements. The earlier years are when that file should be built, calmly, not in the season the filing falls due.

The one lever left

Everything above is countable, and you should count it. But the counting only frames the decisions; it does not make them. How the window is best used depends on what you own, where you own it, what the other country’s rules say, and what the treaty between the two countries does — four things that differ for every family. The rules are general. The plan is personal.

And of all the variables, the date of return is often the only one still in your hands. The assets are where they are; the past years are what they were. A few months either way on the ticket can add a non-resident year or start the clock early. It deserves to be a considered decision, taken with the arithmetic in front of you.

If you are planning a return, or have recently made one, we can prepare a written residence assessment: your status for each of the coming tax years on your actual travel history, what falls inside and outside Indian tax in each of them, and the filings each year will require. It is a statement of position under the current law, not a prediction of outcomes, and it is built on your dates rather than anyone’s rule of thumb. Most families find the questions get smaller once the years have names.