Non Resident Taxation: formula sheet

Key formulas

Basic conditions for an individual

Resident if: (a) stay in India in the tax year ≥ 182 days; OR (b) stay in the tax year ≥ 60 days AND stay in the 4 preceding tax years ≥ 365 days

Meeting either one makes the individual resident. Days need not be continuous. Count both the day of arrival and the day of departure.

Relaxation: 182 days replaces 60 days

For an Indian citizen or person of Indian origin: condition (b) uses 182 days instead of 60 days if the person (i) leaves India in the tax year for employment outside India or as a crew member of an Indian ship (whatever the amount of Indian income), or (ii) comes on a visit to India and total income other than foreign-source income is ≤ ₹15,00,000

A person of Indian origin is one who, or whose parent or grandparent, was born in undivided India. Condition (a) of 182 days is unchanged. The employment-abroad or crew case always uses 182 days. The 120-day alternative never applies to it.

Relaxation: 120 days for high Indian income

Indian citizen or person of Indian origin visiting India, with total income other than foreign-source income > ₹15,00,000: resident if stay ≥ 120 days AND stay in the 4 preceding tax years ≥ 365 days (otherwise the 182-day test)

This applies only to a visitor to India with Indian income above ₹15,00,000. It is a relaxation of the 60-day condition only. The deemed-resident rule below is a separate test. It applies when the person is not resident under the basic conditions.

Deemed resident (RNOR)

Indian citizen + total income other than foreign-source income > ₹15,00,000 + not liable to tax in any other country by reason of domicile or residence → deemed resident

A deemed resident is treated as RNOR. This applies only if the person is not already resident under the basic conditions.

Not ordinarily resident test

A resident individual is RNOR if: (i) NR in 9 of the 10 preceding tax years (that is, resident in fewer than 2 of them); OR (ii) stay in the 7 preceding tax years ≤ 729 days

Meeting either one gives RNOR. The individual is ROR only if resident in at least 2 of the 10 preceding years AND stay in the 7 preceding years ≥ 730 days.

HUF, firm, AOP, BOI and other persons

HUF/firm/AOP/BOI/other person is resident unless control and management of its affairs is wholly outside India in that tax year

For a HUF, ROR/RNOR depends on whether the manager (karta) satisfies the two ordinarily-resident conditions.

Company

Resident if (a) it is an Indian company; OR (b) its place of effective management (POEM) in that tax year is in India

POEM means the place where key management and commercial decisions necessary for the conduct of the business as a whole are, in substance, made.

Scope of total income

ROR: income received/deemed received in India + accruing/deemed accruing in India + accruing outside India. RNOR: first two + income accruing outside India from a business controlled in or profession set up in India. NR: first two only

Income accruing and received outside India is taxable only for an ROR (and for an RNOR only in the controlled-business or set-up-profession case).

Scope for a non-resident

Taxable = Income received in India + Income accruing or arising in India + Income deemed to accrue or arise in India

Foreign income not received in India and not deemed to accrue in India is outside the scope for a non-resident.

Attribution under business connection

Taxable income = Income reasonably attributable to operations carried out in India

Not the whole profit of the non-resident. The same limit applies to SEP, where only income attributable to the Indian transactions or activities is taxed.

Business connection through an agent

Dependent agent + (authority to conclude contracts OR stock for delivery OR securing orders mainly or wholly for the non-resident) + habitual exercise = business connection

An independent agent acting in the ordinary course of business, not working wholly or almost wholly for that non-resident, does not create it.

Excluded operations

Operations confined to purchase of goods in India for export = no business connection

Learn this exclusion for case questions. Other specified exclusions exist, so check the facts given.

SEP test

SEP = (Transactions in goods, services or property with payments above the notified amount) OR (Systematic and continuous soliciting or user interaction above the notified number)

Thresholds are notified by the Government. Use the figure given in the question and do not rely on memory.

Indirect transfer: value test

Foreign shares deemed Indian if fair market value of Indian assets owned by the foreign company > ₹10 crore AND Indian assets ≥ 50% of the value of all assets owned by the foreign company

Both conditions must be met, and both are tested on the assets owned by the foreign company, not on the seller's holding. Exemption: a transferor who, together with its associated enterprises, neither holds the right of management or control nor holds voting power or share capital exceeding 5% of the foreign company is outside this rule. A holder above 5%, or one with management or control, is not excluded. Other statutory exemptions also exist, so check the facts given.

Indirect transfer: taxable portion

Taxable in India = Gain on foreign shares × (Fair market value of Indian assets ÷ Fair market value of all assets)

This is the statutory proportion: only the income attributable to the assets in India is taxed. Use the valuations given in the question.

Salary

Salary payable for services rendered in India = deemed to accrue in India; Salary payable by the Government to a citizen of India for services rendered outside India = deemed to accrue in India

Rest period or leave that falls between services in India is also treated as services rendered in India. The second limb applies only to salary payable by the Government to an Indian citizen for services outside India.

Interest, royalty and FTS

Payable by the Government or a resident = deemed to accrue in India, except where used for a business or profession carried on outside India or for earning income from a source outside India; Payable by a non-resident = deemed to accrue in India only where used for a business or profession carried on in India or for earning income from a source in India

Test who the payer is first, then how the money is used. Use the facts given in the question.

Dividend

Dividend paid by an Indian company = deemed to accrue or arise in India

This holds even when the dividend is paid outside India. The conditions about use of the money for a business or source apply to interest, royalty and FTS, not to dividend.

Special rate on gross income

Tax = Gross income × special rate (no expenses deducted)

Applies to royalty, FTS, dividend and interest of non-residents not connected with an Indian PE. Usual rate 20%; confirm the rate table for tax year 2026-27.

Shipping business presumptive income

Deemed profits = 7.5% × (freight/demurrage/handling receipts)

Receipts: amount paid or payable to the non-resident for carriage from any port in India, plus amount received or deemed received in India for carriage from any place. Taxed at the rate for that person.

Aircraft business presumptive income

Deemed profits = 5% × (amount paid/payable in India + amount received/deemed received in India)

Covers carriage of passengers, livestock, mail or goods from India by a non-resident aircraft operator.

Oil prospecting services presumptive income

Deemed profits = 10% × amount paid/payable for services and facilities in prospecting for or extraction of mineral oil

Includes amount received or deemed received in India. The 10% is the deemed profit, not the tax rate.

Effective tax (before surcharge and cess)

Tax = Presumptive income × normal rate for the person

Example: 7.5% × 35% = 2.625% of gross shipping receipts for a foreign company.

Final tax payable

Base tax + surcharge (if any) + cess at 4% on (tax + surcharge)

Apply surcharge as per the rate table for that person and income level.

Treaty choice

Tax = lower of domestic-law tax and treaty tax

Treaty benefit needs documents such as a tax residency certificate. The treaty can only reduce tax, not increase it.

Who applies

Payer (person responsible for paying) → authority → certificate of appropriate proportion

The application is made by the payer. The non-resident payee is not the applicant under this section.

Scope of payment

Non-salary sum payable to a non-resident, where tax is deductible under section 395(2) or 400(3)

Salary payments are outside this section. Check the nature of the payment first.

Chargeable amount

Chargeable sum = Total sum payable × appropriate proportion determined

The proportion comes from the authority's certificate. Do not estimate it yourself in the answer.

Tax to deduct

Tax to deduct = Chargeable sum × rate applicable to that income

The certificate fixes the proportion. The rate is the rate in force for that income, as given in the question. Add surcharge and cess only if the question says so.

Who is an NRI for this chapter

Individual + citizen of India or person of Indian origin + non-resident in the tax year

Foreign nationals, companies and firms are outside the scheme. Test residential status first.

Foreign exchange asset

Specified asset acquired or purchased with convertible foreign exchange

Specified assets: shares of an Indian company, debentures or deposits of an Indian public company, Central Government securities, other notified assets. The same asset bought with rupees is not a foreign exchange asset.

Tax on investment income

Tax = 20% × investment income, plus applicable surcharge and 4% cess

Investment income is taken gross, with no deductions.

Tax on LTCG on foreign exchange asset

Tax = 12.5% × taxable LTCG on foreign exchange asset, plus applicable surcharge and 4% cess

The 12.5% rate applies only to LTCG on foreign exchange assets, not to all assets. Taxable LTCG is after the reinvestment exemption.

No deductions

No expense or allowance deduction and no Chapter VI-A deduction against investment income

Gross investment income is taxed. This no-deduction rule is for investment income. It is a classic one-mark point.

Net consideration

Net consideration = Full value of consideration − expenditure on transfer

This is the base for the reinvestment test, not the gross sale price.

Reinvestment exemption

Exempt gain = LTCG × Cost of new asset ÷ Net consideration (full exemption if cost of new asset ≥ net consideration)

The original asset must be a long-term capital asset. Invest the net consideration in any specified asset or savings certificates within 6 months of transfer.

Lock-in of new asset

If the new asset is transferred or converted into money within 3 years, the exempted gain is treated as short-term capital gain of that year

Be ready to state this as a consequence in case questions.

Return filing relief

No return needed if total income is only investment income or LTCG on foreign exchange assets and tax is deducted at source

Applies only when TDS covers the income. Any other income takes you out of this relief.

Option to opt out

Declaration with the return for the year → normal provisions apply for that year and later years

Opt out when normal rules give lower tax, for example when you have deductions or low income.

Option on becoming resident

Declaration with return for the year of becoming resident → special provisions continue for foreign exchange assets held

Continues until the assets are transferred or converted into money.

Core rule of Section 158

Resident + retirement benefit account + notified country → income taxed in the manner and tax year prescribed

All three elements must be present. Quote the elements in your answer before concluding.

Timing under the prescribed scheme

Tax year of taxation = tax year of withdrawal or redemption (not the year of accrual)

This is the practical effect of the relief. Check the Income-tax Rules, 2026 in your study material for the exact wording.

Amount taxed on withdrawal

Taxable income = accrued income element of the withdrawal (not the capital contributed)

Return of your own contributions is not income. Only the accrued income is brought to tax.

No double taxation

Income taxed once in India; foreign tax on the same income eligible for relief under Sec 159 or the DTAA

Income already taxed in India in an earlier year is not taxed again on withdrawal.

Conditions checklist

Resident status + notified country + eligible account + prescribed form and information

Missing any one condition means the relief is not available.

Quick revision

• Decide residential status first. A wrong status makes the whole answer wrong.
• A non-resident is taxed in India only on income received here or accruing or arising here, actually or by deemed accrual.
• Income from outside India is not taxable for a non-resident, unless it is received in India or deemed to accrue here.
• Deemed accrual rules widen the base. Always check for business connection, royalty and fees for technical services.
• Check the exceptions in each deemed accrual rule before concluding that income is taxable.
• Special rates usually apply on gross income. Check whether deductions are allowed before computing.
• Presumptive taxation fixes the profit by a rule. Do not compute actual profit in that case.
• Payers must withhold tax on payments to non-residents. Pick the rate and the base before computing the deduction.
• The application for determining the appropriate proportion of the sum chargeable (old Sec 195(2)) modifies withholding. Link it to the withholding question and confirm the 2025 Act section in the ICAI material.
• NRI provisions are special. Apply them only when the person meets the NRI conditions in the question.
• The relief provision for income from retirement benefit accounts in notified countries (old Sec 89A) is narrow. Read the conditions in the text and confirm the 2025 Act section in the ICAI material.
• End every answer with a clear conclusion in one line.

Common mistakes

• Applying the 60-day rule to a citizen who left India for employment or is visiting India. Fix: Check citizenship or Indian origin first. If the person left for employment abroad or as crew, use 182 days in place of 60 days, whatever the income. If the person is a visitor, use 182 days when Indian-source income is ₹15,00,000 or less, and 120 days when it exceeds ₹15,00,000.
• Treating a deemed resident as ROR and taxing global income. Fix: A deemed resident is RNOR. Tax only Indian income and foreign business or profession income controlled or set up in India.
• Taxing the entire profit of the non-resident once a business connection exists. Fix: Write the rule first: only income reasonably attributable to operations carried out in India is deemed to accrue. Then compute that part.
• Treating every agent in India as creating a business connection. Fix: Check whether the agent is dependent, whether authority to conclude contracts or stock or order securing is habitual, and whether an independent agent in ordinary course is involved.
• Deducting expenses from royalty, FTS or interest before applying 20%. Fix: For special-rate income, tax the gross amount. Write 'no deduction allowed' in your answer to earn the mark.
• Applying the special rate when the royalty or FTS is effectively connected with an Indian PE. Fix: Check the PE fact first. If the income is attributable to the PE, compute net business income at the normal rate.
• Saying the non-resident applies for the certificate. Fix: Write 'payer' first. Under section 214 the person making the payment applies.
• Treating the certificate as a change of tax rate. Fix: Remember that section 214 fixes the chargeable proportion. The rate is applied separately to that proportion.
• Applying the special provisions to a non-resident foreigner or to a company. Fix: Check all three conditions: individual, citizen or person of Indian origin, and non-resident in the tax year.
• Treating rupee-bought shares as a foreign exchange asset. Fix: Check how the asset was acquired. Only assets bought with convertible foreign exchange qualify. Others follow the normal LTCG provisions.

Exam tips

• Write the status test as provision, facts, conclusion. State the rule, apply the dates or days given, then name the status. Examiners give marks for each step even if the final status is wrong.
• In case-scenario MCQs, scan for the trigger words: left for employment, visit, citizen, income exceeding ₹15 lakh, POEM. They tell you which version of the day test applies.
• Always add a one-line reason for every income you exclude, such as 'accrued and received outside India'. A bare list loses marks.
• Show the day count month by month when dates are given. It makes the working easy to credit and easy for you to recheck.
• For a company or firm, do not waste time on day counts. Go straight to incorporation, POEM or control and management.
• Write the provision in one line before applying it. Examiners give marks for the rule, the application and the conclusion separately.
• In case-scenario MCQs, look for the trigger words: dependent or independent agent, habitually, notified threshold, purchase for export and substantially from assets in India.
• Use the numbers given in the question for SEP thresholds. Do not quote figures from memory, because they are notified and can change.