Two Tax Systems, One Household

India and the United States each decide for themselves who counts as a resident, and neither asks the other. A person can be a resident of both in the same year, a resident of one and not the other, or in a third category that matters only for bank accounts. Almost every question in this book starts with "which box am I in, in which country?", so this chapter lays out the tests side by side before anything else.

NRI is not a tax status

"NRI" is a foreign exchange term. The Reserve Bank of India defines a Non-resident Indian as a person resident outside India who is a citizen of India. A Person of Indian Origin is a foreign citizen with Indian ancestry, also resident outside India, and the RBI's list includes an Overseas Citizen of India cardholder who lives abroad (RBI, FAQs on accounts in India by non-residents, 16 January 2025). These labels decide which bank accounts you may hold. They tell neither tax office anything about what you owe.

So there are three separate tests, run by three separate bodies: the US tax test, the Indian tax test, and the Indian foreign exchange test. Keep them apart and most of the confusion goes away.

The US test

A US citizen or green card holder is a US resident for tax and is taxed on worldwide income, wherever they live. Everyone else is tested on days. Under the substantial presence test you count every day this year, a third of last year's days and a sixth of the year before's, and you are a resident if the total reaches 183 and you were in the US at least 31 days this year (IRS Publication 519). An H-1B worker who has lived here for years passes it easily.

The test also catches people who are not immigrants at all. Parents who spend long stays with a child can add up quickly:

Someone who spends 150 days here in each of three years reaches 225 weighted days, so the answer to "meets the test" is yes. Publication 519 describes a closer-connection exception, claimed on Form 8840, for people who stay under 183 days in the current year and keep closer ties to another country. It has conditions, so read the publication before relying on it. Two visa-shelf chapters cover the test in full: Your Tax Status Is Not Your Visa and Counting Days: the Substantial Presence Test and Form 8843.

The Indian income-tax test

India's test is in section 6 of the Income-tax Act, 2025, which replaced the 1961 Act for tax years starting on or after 1 April 2026. Section 6 was section 6 of the old Act too, and readers still searching for "section 6(6)" are looking for what is now section 6(13). The Indian tax year runs from 1 April to 31 March.

An individual is resident in India in a tax year with 182 days or more in India, or with 60 days or more in the year plus 365 days or more across the four years before it (section 6(2)). Two exceptions matter to NRIs:

• A citizen of India who leaves the country for employment abroad does not use the second test in the year they leave (section 6(3)).
• A citizen or person of Indian origin who comes to India on a visit does not use it either, unless their Indian income other than foreign-source income is above ₹15 lakh, in which case the 60 days become 120 (section 6(4) and (5)).

A third rule, section 6(7), deems an Indian citizen resident when they are not liable to tax anywhere else by reason of domicile or residence and their income other than foreign-source income is above the same ₹15 lakh. It is aimed at people who have left India without becoming tax residents anywhere. It does not touch a typical US resident, who is liable to tax in the US.

Being resident does not end the sorting. Residents split into two kinds:

• Resident and ordinarily resident (ROR): taxed in India on income from everywhere.
• Resident but not ordinarily resident (RNOR): a resident who was a non-resident in nine of the ten tax years before, or who spent 729 days or fewer in India across the seven years before (section 6(13)(a)); section 6(13)(b) and (c) add two narrower cases for Indian citizens and persons of Indian origin. India taxes an RNOR on income that arises or is received in India, but not on foreign income unless it comes from a business controlled in or a profession set up in India (section 5). Moving back to India is when this status matters most; the answer page on RNOR gives the short version.
• Non-resident (NR): taxed in India only on income that arises or is received there.

How arrival and departure days are counted is a point where the Act is silent and practitioners differ. If your totals sit near a line, take your dates to a Chartered Accountant instead of relying on any online counter, including ours.

The foreign exchange test is a third one

The Foreign Exchange Management Act, 1999 has its own definition. A person resident in India is someone who lived in India more than 182 days in the preceding financial year, but not someone who has gone abroad, or stays abroad, for employment, a business or vocation, or any other purpose that indicates an intention to stay outside India for an uncertain period (section 2(v)). A person resident outside India is simply a person who is not resident in India (section 2(w)). The test depends on purpose as well as days.

This test governs your bank accounts, and the income tax law borrows it where it matters most here: the exemption for interest on an NRE account is given to an individual who is resident outside India as defined in FEMA, or who the Reserve Bank has permitted to hold the account (Income-tax Act, 2025, Schedule IV, Sl. No. 1). That is why the RBI tells holders to redesignate NRE accounts as resident accounts, or move the money to a Resident Foreign Currency (RFC) account, immediately when they return to India for employment or change status, even though they may still be RNOR for tax. The next chapter covers the accounts.

One person, three boxes

The same person can sit in different boxes at the same time.

The table is a pattern, not a prediction: your own dates decide. The RNOR timeline calculator works out the Indian tax years from your days, and the substantial presence test calculator does the same for the US.

When both countries claim you

A person who is a resident of both countries under their domestic laws can use the tie-breaker in Article 4(2) of the India-US tax treaty. It looks in order at where you have a permanent home, then where your personal and economic ties are closer, then where you habitually live, then your nationality, and sends the question to the two tax authorities if none of these settles it. Taking a treaty position on a US return requires a disclosure on Form 8833. The treaty also lets each country tax its own citizens and residents as if the treaty did not exist, the saving clause in Article 1(3); chapter 5 explains what that means for your tax bill.