The Institute of Chartered Accountants of India (ICAI), through its International Taxation Committee, has released the “Handbook on Residential Status for NRIs – Tax and FEMA Aspects”. The July 2026 edition has been brought out to provide members, tax professionals, corporates, expatriates and Non-Resident Indians (NRIs) with a comprehensive and practical understanding of the principles governing residential status under the Income-tax law and the Foreign Exchange Management Act, 1999 (FEMA).
The Handbook assumes significance in view of the increasing cross-border movement of professionals, investments and businesses. Residential status determines the scope of an individual’s tax liability in India and also has implications for treaty relief, foreign tax credit and obligations under the exchange-control framework. ICAI has highlighted that the enactment of the Income-tax Act, 2025 has added a new dimension to the subject by restructuring and renumbering provisions relating to residential status, making it necessary for taxpayers and professionals to understand the transition from the Income-tax Act, 1961 to the new law.
The Handbook explains that the Income-tax Act, 2025 is applicable with effect from 1 April 2026, i.e. Tax Year 2026-27, while matters relating to earlier periods continue to be governed by the Income-tax Act, 1961 in accordance with the repeal and savings provisions contained in Section 536. It also explains the shift from the earlier concepts of “Previous Year” and “Assessment Year” to the unified expression “Tax Year” under the new legislation.
A major focus of the publication is Section 6 of the Income-tax Act, 2025, which governs residential status. The Handbook provides detailed guidance on the 182-day test and the 60-day/365-day test, along with special provisions applicable to Indian citizens leaving India for employment, members of the crew of Indian ships, visiting Indian citizens and Persons of Indian Origin (PIOs). It also explains the modified 120-day threshold applicable in specified cases where the relevant income, other than income from foreign sources, exceeds ₹15 lakh.
The publication sets out the tax consequences arising from the three principal residential classifications—Resident and Ordinarily Resident (ROR), Resident but Not Ordinarily Resident (NOR) and Non-Resident (NR). Broadly, an ROR is subject to tax in India on worldwide income; an NOR is generally taxable on Indian-source income as well as specified foreign income linked to a business controlled from India or profession set up in India; while an NR is generally taxable only on income received, accruing or arising, or deemed to accrue or arise, in India.
An important feature of the Handbook is its integrated treatment of Income-tax residency and FEMA residency. ICAI explains that the two laws apply different tests: residence under the income-tax framework is determined principally with reference to physical presence and prescribed day-count conditions, whereas residence under FEMA depends substantially on the purpose and intention of an individual’s stay or departure. Consequently, the same person can have different residential status under the Income-tax Act and FEMA during the same period, making separate examination under both laws essential.
The Handbook goes beyond the basic residency provisions and covers the transition from the Income-tax Act, 1961 to the Income-tax Act, 2025; Double Taxation Avoidance Agreements (DTAAs); treaty tie-breaker rules; Tax Residency Certificates; foreign tax credit; global mobility and expatriate taxation; transfer pricing; judicial precedents; and the residency laws of the United Kingdom, United States, United Arab Emirates, Singapore, Canada, Australia and the Netherlands. It also contains a dedicated chapter on FEMA and concludes with worked case studies illustrating practical tax and FEMA situations faced by NRIs and returning Indians.
The Handbook also refers to Notification No. 70/2015, under which Rule 126 of the Income-tax Rules, 1962 was inserted with retrospective effect from 1 April 2015 for determining the period of stay in India in specified cases involving members of the crew of foreign-bound ships. The Rule provides a mechanism for excluding the prescribed voyage period, based on entries in the Continuous Discharge Certificate, while computing the individual’s stay in India.
The International Taxation Committee has structured the Handbook in a practical question-and-answer format, supported by statutory provisions, comparative analysis, judicial precedents and worked examples, with the objective of enabling professionals and taxpayers to address complex residential-status issues with greater clarity and consistency. The publication is intended to serve as a dependable reference for professionals advising NRIs and other internationally mobile individuals on taxation and regulatory compliance.
The Handbook can be accessed at: https://a2ztaxcorp.net/wp-content/uploads/2026/09/Handbook-on-RESIDENTIAL-STATUS-OF-TAX-AND-FEMA.pdf
