Published 9 May 2026
From the day-count question to the residential bucket to the income-type categorisation to the Indian Income Tax Return schedule -- a structured decision tree that maps every Non-Resident Indian situation to its Indian tax outcome
How to Use This Document
This decision tree converts the residency framework of NRI-01, the deemed-resident overlay of NRI-02, the income-source rules in section 9 of the Income-tax Act, 1961, and the income-head architecture of the Income Tax Return schedules into a single decision-by-decision flow. Begin with Step 1 (residential-status determination), navigate through Step 2 (income-source classification), and end at Step 3 (return form / schedule mapping). Each step contains a yes/no or selection question; the answer points to the next step or to a final outcome. A standalone Scalable Vector Graphics version of this flowchart is also provided alongside this document for visual presentation on the BharatTax website.
Step 1 -- Determine Residential Status for the Tax Year
Question | Answer | Outcome |
|---|---|---|
Q1. Were you in India for 182 days or more during the relevant Tax Year (1 April to 31 March)? | Yes | Go to Q5 (RNOR / ROR sub-test) |
Q1. (continued) | No | Go to Q2 |
Q2. Are you an Indian citizen or Person of Indian Origin who visited India during the year? | Yes | Go to Q3 |
Q2. (continued) | No (foreign citizen visit) | Use the standard 60+365 cumulative test -- if not satisfied, go to Q4 |
Q3. Was your non-foreign-source Indian income above ₹15 lakh during the year? | Yes | Use the 120-day threshold for the cumulative test |
Q3. (continued) | No | Use the 60-day threshold for the cumulative test |
Q4. Are you an Indian citizen, with non-foreign-source income above ₹15 lakh, AND not liable to tax abroad (e.g., United Arab Emirates, Bahrain, Saudi Arabia, Brunei, Cayman)? | Yes | Deemed Resident under sub-section (1A) of section 6 -- treated as Resident but Not Ordinarily Resident; jump to Step 2 |
Q4. (continued) | No | Status: Non-Resident -- jump to Step 2 |
Q5. Were you Non-Resident in 9 of the 10 preceding tax years OR were you in India 729 days or less during the preceding 7 years? | Yes (any one) | Status: Resident but Not Ordinarily Resident -- jump to Step 2 |
Q5. (continued) | No | Status: Resident and Ordinarily Resident -- jump to Step 2 |
Step 2 -- Classify Each Income Item by Source and Head
Income Item | Source Test | Head |
|---|---|---|
Salary by Indian employer for work performed in India | Indian-source under section 9(1)(ii) | Salary |
Salary by Indian employer for work performed abroad | Indian-source under section 9(1)(ii) -- subject to relief in some cases | Salary |
Salary by foreign employer for work performed abroad | Foreign-source | Salary |
Salary by foreign employer for work performed in India | Indian-source | Salary |
Indian rental income | Indian-source under section 9(1)(v)/(vi)/(vii) (immovable-property situs) | House Property |
Foreign rental income | Foreign-source | House Property |
Indian business income (sole proprietorship, partnership, controlled-Indian-business) | Indian-source under section 9(1)(i) | Profits and Gains of Business or Profession |
Foreign business income (controlled abroad) | Foreign-source | Profits and Gains of Business or Profession |
Indian capital gain (Indian property, Indian shares, Indian mutual funds) | Indian-source under section 9(1)(i) read with section 45 | Capital Gains |
Foreign capital gain (foreign property, foreign shares) | Foreign-source | Capital Gains |
Indian interest, dividend, mutual-fund income | Indian-source under section 9(1)(v) / (vi) / (vii) | Income from Other Sources |
Foreign interest, dividend | Foreign-source | Income from Other Sources |
Non-Resident External / Foreign Currency Non-Resident interest | Indian-source but exempt under clause (4)(ii) / clause (15)(iv) of section 10 | Exempt |
Non-Resident Ordinary interest | Indian-source -- taxable | Income from Other Sources |
Foreign salary by Resident-but-Not-Ordinarily-Resident from India-controlled business / profession | Specifically taxable in Resident-but-Not-Ordinarily-Resident under sub-clause (b) of clause (a) of sub-section (6) of section 6 | As applicable |
Step 3 -- Apply the Residential Status Filter to Each Income Item
Residential Status | Indian-Source Income | Foreign-Source Income |
|---|---|---|
Resident and Ordinarily Resident | Taxable in India (full) | Taxable in India (full); foreign tax credit under section 90 / 91 |
Resident but Not Ordinarily Resident | Taxable in India (full) | Taxable in India ONLY for foreign income from a business controlled in India or profession set up in India; pure foreign-source income (foreign salary, foreign rent, foreign dividend, foreign capital gain) is excluded |
Non-Resident | Taxable in India (full); subject to section 195 Tax Deducted at Source and Double Taxation Avoidance Agreement reduction | Not taxable in India |
Deemed Resident under sub-section (1A) | Taxable in India (full) | Treated as Resident but Not Ordinarily Resident -- same scope as Resident but Not Ordinarily Resident |
Step 4 -- Map to the Income Tax Return Form
Status / Profile | Income Tax Return Form |
|---|---|
Resident and Ordinarily Resident, salary + one house property + interest only, total income up to ₹50 lakh | Income Tax Return-1 (Sahaj) |
Resident and Ordinarily Resident with capital gains, multiple house properties, or foreign income / assets | Income Tax Return-2 |
Resident and Ordinarily Resident with business / profession income | Income Tax Return-3 |
Resident with presumptive business / profession (sections 44AD / 44ADA / 44AE) | Income Tax Return-4 (Sugam) |
Resident but Not Ordinarily Resident -- typically only Indian source | Income Tax Return-2 (or ITR-3 if business) |
Non-Resident with Indian salary / rent / capital gain / Other Sources | Income Tax Return-2 |
Non-Resident with Indian business connection / Permanent Establishment | Income Tax Return-3 |
Deemed Resident under sub-section (1A) | Income Tax Return-2 with Resident but Not Ordinarily Resident sub-status |
Foreign company with Place of Effective Management in India | Income Tax Return-6 |
Step 5 -- Map to the Specific Schedule
Income Item | Schedule(s) in Income Tax Return |
|---|---|
Salary | Schedule S (Schedule Salaries) plus Schedule TDS1 |
House Property -- Indian rental | Schedule HP plus Schedule TDS2 if rent Tax Deducted at Source claimed |
Long-Term Capital Gain on listed equity / equity-oriented mutual fund (post 23 July 2024) | Schedule 112A; pre-23 July 2024 transfer Schedule CG |
Short-Term Capital Gain on listed equity (section 111A) | Schedule CG; tax @ 20% (post 23 July 2024) |
Long-Term Capital Gain on land / building | Schedule CG; tax @ 12.5% (post 23 July 2024) or 20% with indexation (election) |
Other Capital Gains -- unlisted, gold, etc. | Schedule CG |
Indian dividend, interest, savings-bank interest | Schedule OS |
Section 87A rebate (Resident only) | Schedule TI implicit; verify Section 87A computation |
Foreign income (Resident and Ordinarily Resident only) | Schedule FSI -- Foreign Source Income |
Foreign tax credit | Schedule TR with Form 67 filed before return |
Foreign assets and accounts (Resident and Ordinarily Resident only) | Schedule FA -- mandatory; section 43 of Black Money Act, 2015 penalty if missed |
Tax Deducted at Source by Indian payers | Schedule TDS1 (Salary), Schedule TDS2 (Other), Schedule TCS |
Special-rate income (sections 111A / 112 / 112A / 115BB / 115BBH / 115BBA / 115BBJ) | Schedule SI -- Income chargeable at Special Rates |
Exempt income (Non-Resident External interest, agricultural, others) | Schedule EI |
Donations under section 80G | Schedule 80G |
Chapter VI-A deductions (sections 80C / 80D / 80E / 80TTA / 80TTB / 80GG etc.) | Schedule VI-A |
Step 6 -- Special Compliance Layers
If This Applies | Additional Compliance |
|---|---|
Non-Resident claiming Double Taxation Avoidance Agreement benefit | Tax Residency Certificate from foreign country plus Form 10F filed in India before payment / deduction |
Resident claiming Foreign Tax Credit | Form 67 filed before the Income Tax Return; foreign tax certificate retained |
Outward remittance from India to a Non-Resident | Form 15CA (Part A / B / C / D) and Form 15CB (CA certificate) where applicable |
Outward Liberalised Remittance Scheme remittance by Resident | Form 15CA Part D; section 206C(1G) Tax Collected at Source |
Schedule FA disclosure (Resident and Ordinarily Resident with foreign assets) | All foreign accounts, holdings, beneficial interests; section 43 BMA penalty for non-disclosure |
Section 195 Tax Deducted at Source by Indian payer to Non-Resident | Form 27Q quarterly + Form 16A within 15 days |
Form 13 Lower Deduction Certificate | Application via TRACES portal; valid for the financial year |
Permanent Account Number-Aadhaar exemption (Non-Resident, foreign citizen, super-senior, residents of Assam / J&K / Meghalaya) | Update residential status on the e-filing portal under Profile |
Worked Example -- Three Profiles Through the Flowchart
Profile A -- Mr. Rajesh, Software Engineer, San Francisco
Step 1: 28 days in India in Tax Year 2025-26; below 182; below 60 (Indian income only ₹4 lakh, below ₹15 lakh threshold so 60-day rule applies); not Indian citizen tax-haven resident -- Status: Non-Resident. Step 2: Salary in San Francisco (foreign-source); Indian Non-Resident Ordinary interest ₹4 lakh (Indian-source). Step 3: Foreign salary not taxable in India; Non-Resident Ordinary interest taxable. Step 4: Income Tax Return-2 as Non-Resident. Step 5: Non-Resident Ordinary interest in Schedule OS; Tax Deducted at Source claim in Schedule TDS2. Step 6: Tax Residency Certificate from United States Internal Revenue Service plus Form 10F to apply 15% Double Taxation Avoidance Agreement rate.
Profile B -- Mrs. Anjali, Returning Non-Resident Indian
Step 1: 215 days in India; > 182 -- Resident; was Non-Resident in 9 of 10 preceding years -- Resident but Not Ordinarily Resident. Step 2: Indian rental ₹6 lakh (Indian-source); United Kingdom employment salary April-August (foreign-source from a business / profession not set up in India). Step 3: Indian rental fully taxable; United Kingdom salary not taxable (Resident but Not Ordinarily Resident scope). Step 4: Income Tax Return-2 as Resident but Not Ordinarily Resident. Step 5: House Property in Schedule HP; United Kingdom salary in Schedule EI (or omitted as not taxable for Resident but Not Ordinarily Resident). Step 6: No Schedule FA filing (Resident but Not Ordinarily Resident exempt); Form 67 not needed since United Kingdom salary excluded.
Profile C -- Mr. Suresh, Indian Citizen, Dubai
Step 1: 80 days in India; below 182; Indian citizen with non-foreign income above ₹15 lakh, so 120-day threshold; 80 below 120 -- not Resident under section 6(1); but Indian citizen with non-foreign income above ₹15 lakh, not liable to tax in United Arab Emirates -- Deemed Resident under section 6(1A); treated as Resident but Not Ordinarily Resident. Step 2: Indian rental ₹28 lakh (Indian-source); Dubai salary (foreign-source from a business not set up in India). Step 3: Indian rental fully taxable; Dubai salary not taxable (Resident but Not Ordinarily Resident scope -- exclude pure foreign-source). Step 4: Income Tax Return-2 with Resident but Not Ordinarily Resident sub-status box. Step 5: Indian rent in Schedule HP. Step 6: No Schedule FA filing.
BharatTax NRI Compliance Tool Is your Non-Resident status reflected in the income-tax department's Permanent Account Number database, and is your Permanent Account Number-Aadhaar status correctly tagged as exempt? Use the NRI Compliance Tool at itr.bharattax.co to verify, update residential status on the e-filing portal, and pre-validate your Non-Resident External or Non-Resident Ordinary bank account for any refund. |
Visual Companion
A standalone Scalable Vector Graphics version of this flowchart is provided alongside this document at NRI-FLOWCHART-Visual.svg. The Scalable Vector Graphics file can be embedded directly in the BharatTax website as an interactive flowchart, or printed at any size for use as a wall reference in the practice.
Case Law Reference and Anticipatory Legal Analysis
Case Law Reference: The integrated NRI taxability framework The NRI taxability framework operates through residential-status determination (section 6), source rule (section 9), DTAA framework (section 90), and section 195 TDS. The Supreme Court in Azadi Bachao Andolan v. Union of India (2004) 263 ITR 706 (SC) and Union of India v. Vodafone International Holdings (2012) 341 ITR 1 (SC) confirmed the architectural primacy of the DTAA where treaty provisions are more beneficial. The Income Tax Appellate Tribunal jurisprudence across the various headings -- residency, source, treaty interpretation, withholding-tax operation -- provides operational guidance. [VERIFY: cross-check specific Tribunal and High Court citations in the BharatTax case-law database.] |
Prospective Interpretation -- The post-2025-Act transition The NRI taxability decision tree -- Status -> Source -> Treaty -> TDS -> Schedule -- captures the four-step practitioner discipline. The Income-tax Act, 2025 effective from Tax Year 2026-27 carries forward the substantive architecture but renumbers and consolidates several provisions. The Tribunal jurisprudence developed under the 1961 Act framework will largely govern the 2025 Act provisions where the substantive text is preserved; new interpretive issues may emerge where consolidation has altered the wording. The BharatTax case-law database should monitor emerging Tribunal positions on the post-2025-Act transition. [VERIFY: confirm Tribunal decisions emerging on the post-2025-Act framework.] |
Key Takeaways
- Six-step decision flow -- residential status, income source, scope-of-tax filter, return form, schedule mapping, special-compliance layer.
- The four residential buckets -- Resident and Ordinarily Resident, Resident but Not Ordinarily Resident, Non-Resident, Deemed Resident under sub-section (1A) -- determine the scope of taxation.
- Income Tax Return-2 covers most Non-Resident Indian situations; Income Tax Return-3 if business; Income Tax Return-1 only for narrow Resident-and-Ordinarily-Resident salaried profiles.
- Schedule FA applies only to Resident and Ordinarily Resident -- not to Resident but Not Ordinarily Resident or Non-Resident. Black Money Act exposure follows from this.
- Special-compliance layers -- Tax Residency Certificate plus Form 10F for treaty rates; Form 67 for foreign tax credit; Form 15CA / 15CB for outward remittance; Form 13 for lower Tax Deducted at Source -- attach as relevant per the profile.
Disclaimer: This article is for general information only. It does not constitute tax / legal advice. Please consult a qualified Chartered Accountant or tax practitioner for advice specific to your circumstances. The legal position is current as of FA 2024 (No. 2) / FA 2025; subsequent amendments and CBDT notifications may modify the position.