Who is most impacted by the 120-day rule?

It commonly impacts NRIs with higher Indian income and frequent visits to India, including many Gulf-based NRIs with India-source income.

If my Indian income is below ₹15 lakh, does the 120-day rule apply?

If you do not meet the income condition, the 120-day rule generally does not apply; day-count tests should be evaluated as per applicable rules.

Does staying 119 days avoid the 120-day rule?

Staying below 120 days generally avoids triggering the 120-day threshold, subject to other applicable conditions.

Are arrival and departure days counted for the 120-day rule?

Yes. Arrival and departure days are typically counted as days in India.

120 Day Rule for NRI – Indian Tax Residency Explained

Q: What is the 120 day rule for NRI?

The 120-day rule is an additional residency condition that may apply in certain cases, including where Indian income exceeds a specified threshold, potentially changing residency outcome even below 182 days.

The 120 day rule for NRI was introduced to prevent high-income individuals from maintaining non-resident status while spending significant time in India. This rule has caused confusion among NRIs, especially those living in Gulf countries who frequently visit India.

If misunderstood, the 120-day rule can result in an unexpected change in residential status and expose global income to Indian taxation.

What Is the 120 Day Rule for NRI?

As per Section 6 of the Income Tax Act, an individual may be considered Resident in India if:

They are a citizen of India or Person of Indian Origin (PIO).
Their Indian income exceeds ₹15 lakh during the financial year.
Their stay in India is 120 days or more in the same financial year.

This rule applies in addition to the 182-day rule and overrides it for high-income cases.

Why Was the 120 Day Rule Introduced?

The Indian government introduced the 120-day rule to curb tax avoidance by individuals who earned substantial income from India but continued to claim non-resident status despite extended stays.

120 Day Rule Example

Example:
An Indian citizen working in Dubai has the following details:

Indian income: ₹20 lakh
Stay in India: 135 days

Residential status: Resident or RNOR

Even though the stay is below 182 days, the 120-day rule applies due to income exceeding ₹15 lakh.

Who Is Affected by the 120 Day Rule?

Gulf NRIs with high Indian income.
Individuals with rental or business income in India.
NRIs with capital gains from Indian assets.
Frequent travelers to India.

Who Is Not Affected by the 120 Day Rule?

NRIs with Indian income below ₹15 lakh.
Foreign citizens (non-Indian passport holders).
Individuals staying less than 120 days.

120 Day Rule vs 182 Day Rule

Criteria	120 Day Rule	182 Day Rule
Stay Threshold	120 days	182 days
Income Condition	Indian income > ₹15 lakh	No income condition
Target Group	High-income NRIs	All NRIs

Check Your Eligibility (Calculator)

Frequently Asked Questions

Does the 120 day rule apply to OCI holders?
Yes. OCI holders who are citizens of India or PIOs may be covered if income conditions are met.

Does RNOR status protect global income?
RNOR status offers limited protection, but professional advice is recommended.

Can I avoid tax if I stay exactly 119 days?
Staying below 120 days generally avoids triggering this rule.

Conclusion

The 120-day rule is a critical consideration for high-income NRIs. Understanding and tracking both income and physical presence is essential to avoid unexpected tax liabilities.