The Institute of Chartered Accountants of India (ICAI), through its International Taxation Committee, has brought out a comprehensive publication titled “Handbook on Residential Status for NRIs – Tax and FEMA Aspects”. The July 2026 edition seeks to provide professionals, taxpayers, expatriates and Non-Resident Indians with a practical understanding of residential status under the Income-tax Act, 2025 and the Foreign Exchange Management Act, 1999 (FEMA).
The Handbook assumes significance in the backdrop of increasing cross-border movement of professionals, overseas employment, foreign investments and business interests across jurisdictions. Residential status determines the scope of an individual’s tax liability in India and also has implications for treaty relief, foreign tax credit and exchange-control obligations. ICAI has noted that an incorrect determination of residential status may lead to unintended tax exposure, reassessment, interest or penalties.
The publication also addresses the transition from the Income-tax Act, 1961 to the Income-tax Act, 2025. The Handbook notes that the Income-tax Act, 2025 applies with effect from 1 April 2026 (Tax Year 2026-27), while the Income-tax Act, 1961 continues to remain relevant for earlier years and specified pending proceedings by virtue of the repeal and savings provisions. It is designed to assist members and taxpayers in understanding the substantive continuity as well as the restructuring and renumbering of provisions governing residential status under the new law.
Handbook explains three categories of residential status and their tax implications
A key focus of the Handbook is the classification of individuals as Resident and Ordinarily Resident (ROR), Resident but Not Ordinarily Resident (NOR), and Non-Resident (NR) and the resulting scope of taxation in India. It explains that an ROR is generally taxable in India on worldwide income, while an NOR is taxable on Indian-source income and specified foreign income linked to a business controlled from India or profession set up in India. A Non-Resident is generally taxable only on income received, accruing or arising, or deemed to accrue or arise, in India.
The Handbook explains the individual residency provisions under Section 6 of the Income-tax Act, 2025, including the 182-day test and the 60-day/365-day test. It also discusses special provisions applicable to Indian citizens leaving India for employment or as crew members of Indian ships, visiting Indian citizens and Persons of Indian Origin, as well as the special 120-day threshold for specified visitors having income exceeding Rs. 15 lakh, excluding income from foreign sources.
The publication also covers the deemed residency provisions applicable in specified circumstances to Indian citizens who are not liable to tax in another country or territory by reason of domicile, residence or similar criteria and whose prescribed income exceeds the specified threshold. It further explains the conditions for determining Not Ordinarily Resident (NOR) status, an area of particular relevance for NRIs returning to India after an extended period overseas.
Income-tax and FEMA residency may lead to different outcomes
One of the important features of the Handbook is its integrated treatment of residence under income-tax law and FEMA. ICAI explains that income-tax residency is determined principally with reference to an individual’s physical presence and day-count in India, whereas FEMA residency is based substantially on the intention and purpose of the person’s stay. As a result, the two laws may reach different conclusions regarding the residential status of the same individual during the same period.
The Handbook accordingly emphasises that income-tax and FEMA residency must be examined independently. For instance, an individual who leaves India with an intention to remain abroad for employment or business may become a non-resident for FEMA purposes from the relevant date, while still qualifying as an Indian tax resident for that tax year depending upon the number of days spent in India.
Treaty relief, global mobility and foreign tax credit also covered
Beyond domestic residency rules, the Handbook examines the interaction of Indian residential status with Double Taxation Avoidance Agreements (DTAAs), including treaty tie-breaker rules in cases of dual residence, the evidentiary significance of a Tax Residency Certificate (TRC) and the mechanism for claiming Foreign Tax Credit (FTC). It also deals with global mobility issues arising from secondment and deployment of employees and expatriates and discusses transfer pricing concepts including the arm’s length principle, documentation, safe harbour provisions and Mutual Agreement Procedure.
The publication further examines relevant judicial precedents and provides an overview of residential-status rules in major jurisdictions to which Indians frequently relocate, including the United Kingdom, United States, United Arab Emirates, Singapore, Canada, Australia and the Netherlands, along with relevant treaty considerations.
Practical case studies address real-world NRI situations
The Handbook concludes with worked case studies applying the income-tax and FEMA principles to practical situations faced by NRIs and returning Indians. These include circumstances where an individual may simultaneously be a FEMA non-resident and an income-tax resident, highlighting the need for separate analysis of taxability, foreign-income reporting, account redesignation and other regulatory requirements.
The publication comprises 11 chapters, covering the basic framework and taxability matrix; individual residency; transition from the Income-tax Act, 1961 to the Income-tax Act, 2025; treaties and foreign tax credit; global mobility; transfer pricing; taxability; judicial precedents; global residency laws; FEMA; and worked case studies.
ICAI has stated that the Handbook is intended to serve as a useful and practical reference for Chartered Accountants, professionals, corporates, expatriates, NRIs and returning Indians navigating residential-status, taxation and regulatory-compliance issues. Its scope is focused on the residential status of individuals and does not extend to the residential status of entities or to investment opportunities available to NRIs and their associated tax and regulatory implications.
The Handbook can be accessed at: https://a2ztaxcorp.net/wp-content/uploads/2026/08/ICAI-Handbook-on-Residential-status-for-NRIs-Tax-and-FEMA-Aspects.pdf
