Budget 2026 for Non-Resident Indians: Industry body wants 182-day residency rule back; here's why

Before the Finance Act 2020, visiting Non-resident Indians (NRIs) and Persons of Indian origin (PIOs)were considered as ‘non-resident’ if their stay in India was below 182 days during the relevant tax year, even if their stay in India in the preceding four years was more than 365 days. This resulted in such taxpayers not being required to pay tax in India on their foreign-sourced incomes.

The Finance Act 2020 changed the above rule by introducing the following graded extended residency rules:

• Visiting NRIs/PIOs will be treated as non-resident if their stay in India during relevant tax year is less than 120 days (instead of 182 days)

• If India-sourced income is less than ₹15 lakh, then such persons will continue to be treated as non-residents if their stay in India during relevant tax year is less than 182 days (as it was before Finance Act 2020).

• If the India-sourced income is more than ₹15 lakh and the visiting NRI/PIO has been in India for 120 days or more but less than 182 days, then such person will be treated as ‘not ordinarily residents’.

Ahead of Budget 2026 on February 1, experts at the Bombay Chambers of Commerce and Industry (BCCI) have said that the above rules introduced by the Finance Act 2020 have resulted in adding more complexity to the extended residency rule for visiting NRIs and PIOs.

"Earlier, they simply had to keep a check on the period of stay in India below 182 days. Now, they also need to keep a tab on India sourced income of ₹15 lakh as also their stay in preceding four tax years. This creates various issues and confusion for taxpayers," BCCI said in its pre-budget memorandum.

In their pre-budget memorandum, the experts have suggested the government to restore the 182-day residency rule, citing the following reasons:

• Restoration of previous limit of 182 days without any income threshold will encourage such NRIs/PIOs to spend more time in India with their family and friends, spend more money on travel and stay and have a net positive revenue impact due to externalities.

• It will remove the complications caused by graded residency rule based on physical stay in India and quantum of India sourced income.

• The residency rule will become more simpler to understand and administer for both taxpayers and Tax Department

• If NRIs/PIOs restrict their stay in India to less than 120 days, it will aggravate the negative impact on travel and hospitality sectors in India.

• The tax policy measure of reducing threshold from 182 days to 120 days does not meet the desired purpose making people carrying out substantial economic activity from India but dodging residency in India by limiting their stay to 182 days, pay tax on their global incomes in India.

• The lower threshold of 120 days’ stay in India could lead to NRIs/ PIOs ceasing to create wealth/additional investments in India to keep their Indian income below 15 lacs in any given year.

• The targeted individuals can simply avoid the higher taxes by limiting their stay in India to below 120 days instead of 182 days

"The above change will at the highest result in taxation of certain India sourced incomes like dividends, interest, etc. at special rates instead of slab rates. But residency rules for individuals will get considerably simplified and easy to understand," BCCI said.

Finance Minister Nirmala Sitharaman will present Union Budget 2026 on February 1, 2026.