# Tax Residency India 2026 for Foreign Employees and the 182 Day Rule

> Source: https://krystal7.com/insights/tax-residency-foreign-employees-india-182-day-rule
> Publisher: Krystal7 Consultants (Krystal7 Innovations Private Limited), Gurugram, India
> Author: CA Nandini
> Published: 22 Jan 2026; updated 24 Oct 2026
> Summary: Under section 6 of the Income Tax Act, 2025, a foreign employee is resident after 182 days in India, or 60 days plus 365 in the past four years.

*Written by CA Nandini Hasija, Krystal7 Consultants. Last updated 23 October 2026.*

## AI Overview Summary

- A foreign employee is resident in India for a tax year after 182 days in India, under section 6(2)(a) of the Income Tax Act, 2025.
- Sixty days in the tax year also makes a foreign employee resident where the four preceding tax years add up to 365 days or more, under section 6(2)(b).
- Most expatriates start as not ordinarily resident under section 6(13), so India taxes their Indian income and income received in India, not their other foreign income.
- Salary for work done in India is deemed to accrue in India under section 9(3)(a), wherever it is paid and whatever the employee's residential status.
- A short visit escapes Indian tax on salary under Schedule IV, serial 3 (90 days) or a treaty employment article (183 days), with a TRC and Form 41 for the treaty.

**Under section 6(2) of the Income Tax Act, 2025, a foreign employee is resident in India after 182 days in a tax year. Sixty days is enough where the four preceding tax years add up to 365 days or more. Most expatriates start as not ordinarily resident under section 6(13). Salary for work done in India is taxable here whatever the status, unless Schedule IV or a treaty exempts it.**

This page is for foreign employees posted to India, short term visitors, and the HR and finance teams of Indian subsidiaries that employ them. It covers the residency tests, the tax year, salary, the short stay exemptions, the treaty tie breaker, the papers and three worked examples.

## How is tax residency decided for an individual in India?

India decides an individual's residential status for each tax year, from 1 April to 31 March, under section 6 of the Income Tax Act, 2025. There are three outcomes: resident and ordinarily resident, resident but not ordinarily resident (RNOR), and non resident. Days physically spent in India drive the result.

Section 6(1) says residential status is decided for each tax year under the section. Nationality and visa type do not decide the result on their own. A person on an employment visa who leaves in July can be non resident for that year. A frequent business visitor can become resident without ever holding an employment visa.

The status then fixes what India taxes. Section 5 of the Act sets the scope of total income for each status.

| Residential status | Section of the Income Tax Act, 2025 | Income India taxes |
|---|---|---|
| Resident and ordinarily resident | 6(2), not within 6(13) | Worldwide income, under section 5(1) |
| Resident but not ordinarily resident | 6(13) | Income received or accruing in India, plus foreign income from a business controlled in India or a profession set up in India, under section 5(1)(c) |
| Non resident | Fails section 6(2) to (7) | Income received or accruing in India only, under section 5(2) |

Sources: sections 5 and 6 of the Income Tax Act, 2025.

A company's residence follows a different rule. Section 6(10) makes a company resident if it is an Indian company or its place of effective management is in India. Our note on [place of effective management](/insights/place-of-effective-management-india) covers that test.

## What is the 182 day rule?

The rule sits in section 6(2)(a) of the Income Tax Act, 2025. It makes an individual resident for any tax year in which they spend 182 days or more in India. The days need not be continuous. Every visit in the tax year counts towards the total.

The rule applies to every individual, foreign or Indian. It is the test most expatriates on a full year posting meet. An employee who arrives on 1 October and stays to 31 March spends 182 days in India and is resident for that tax year.

The Act does not say how to count the days of arrival and departure. We count both as days in India, which is the cautious reading. We build the count from passport stamps and travel records, not from memory or leave records.

## How does the 60 day and 365 day test work?

Section 6(2)(b) has two limbs. The individual is in India for 60 days or more in the tax year. They were also in India for 365 days or more in the four preceding tax years. Both limbs must be met. This test catches frequent visitors who never reach 182 days in one year.

The rule bites on regional heads, project directors and board members who visit the Indian subsidiary often. Take a manager who spends 100 days a year in India for four years. That is 400 days in the four years. A visit of 60 days or more in the fifth year then makes the manager resident.

For foreign nationals with no Indian origin, the 60 day limb has no exceptions. The relief for Indian citizens and people of Indian origin, covered next, does not reach them. So we track a rolling five year day count for every frequent visitor, not just the current year.

| Test | Section of the Income Tax Act, 2025 | Days in the tax year | Days in the four preceding tax years | Who it applies to |
|---|---|---|---|---|
| 182 day rule | 6(2)(a) | 182 or more | Not relevant | Everyone |
| 60 day rule | 6(2)(b) | 60 or more | 365 or more | Everyone, except as below |
| Citizen leaving for employment abroad or as crew of an Indian ship | 6(3) | 6(2)(b) does not apply, so 182 or more | Not relevant | Indian citizens |
| Citizen or person of Indian origin visiting India, Indian income up to INR 15,00,000 | 6(4) | 6(2)(b) does not apply, so 182 or more | Not relevant | Indian citizens and persons of Indian origin |
| Same visitor, Indian income above INR 15,00,000 | 6(5) | 120 or more | 365 or more | Indian citizens and persons of Indian origin |
| Deemed resident citizen | 6(7) | Any | Not relevant | Indian citizens not liable to tax elsewhere, Indian income above INR 15,00,000 |

Source: section 6 of the Income Tax Act, 2025. "Indian income" here means total income other than income from foreign sources, as section 6(14) defines it.

## Which exceptions apply to Indian citizens and people of Indian origin?

Section 6(3) switches off the 60 day test for an Indian citizen who leaves India for employment, or as crew of an Indian ship. Section 6(4) switches it off for a citizen or person of Indian origin visiting India. Section 6(5) restores it at 120 days where their Indian income exceeds INR 15,00,000.

These rules matter for two groups in a foreign owned company. One is Indian employees seconded abroad, who stay non resident if they spend fewer than 182 days in India. The other is foreign nationals of Indian origin, such as many OCI cardholders, who visit India often. Whether a long posting is still a visit is a question of fact. We do not rely on section 6(4) for an employee who relocates.

Section 2(78) of the Income Tax Act, 2025 defines "person of Indian origin". It covers an individual who was born in undivided India, or whose parent or grandparent was born there. So we check the birthplaces of the employee, both parents and all grandparents before relying on section 6(4).

The 120 day rule is narrow. It applies only to a visiting citizen or person of Indian origin whose income other than from foreign sources exceeds INR 15,00,000. Section 6(14) defines income from foreign sources as income accruing outside India. Income from a business controlled in India or a profession set up in India is excluded. Such a person who is resident under section 6(5) is always RNOR under section 6(13)(b).

## Who is resident but not ordinarily resident?

A resident individual is RNOR for a tax year under section 6(13) of the Income Tax Act, 2025 in four cases. They were non resident in nine of the ten preceding tax years. Or they were in India for 729 days or less in the seven preceding tax years. Section 6(13) also covers the 120 day visitors and deemed resident citizens.

| RNOR test | Clause of section 6(13) | What it looks at |
|---|---|---|
| Non resident in nine of the ten preceding tax years | 6(13)(a)(i) | Past residential status, year by year |
| In India for 729 days or less in the seven preceding tax years | 6(13)(a)(ii) | Total days in India over seven years |
| Citizen or person of Indian origin resident only because of the 120 day rule | 6(13)(b) | Visitors with Indian income above INR 15,00,000 and 120 to 181 days in India |
| Deemed resident citizen | 6(13)(c) | Citizens resident only under section 6(7) |

Source: section 6(13) of the Income Tax Act, 2025.

Most foreign employees on a first posting are RNOR for two or three tax years. One test is enough. The 729 day limb usually lasts longer than the nine of ten limb for someone who arrives mid year.

RNOR status is valuable for an expatriate with income at home. Rent from a flat in Berlin, interest from a Toronto bank account or gains on home country shares stay outside Indian tax. That holds unless the money is received in India or comes from a business controlled in India. Indian salary is taxed in full either way.

## When is an Indian citizen deemed resident?

Section 6(7) of the Income Tax Act, 2025 deems some Indian citizens resident. The citizen must not be liable to tax in any other country by reason of domicile, residence or a similar criterion. Their income other than from foreign sources must also exceed INR 15,00,000. Such a person is RNOR under section 6(13)(c).

The rule targets Indian citizens who live in a country with no personal income tax and pay tax nowhere. It does not apply to foreign nationals, so it rarely affects an expatriate posted to India. It can affect Indian staff that a foreign group moves to a no tax country.

Section 6(8) adds that section 6(7) does not apply to someone already resident under sections 6(2) to 6(6). So the deeming rule is a fallback, not an extra test.

## How does the tax year under the Income Tax Act, 2025 apply to residency?

From 1 Apr 2026 the Income Tax Act, 2025 replaces the "previous year" with the "tax year", and tax year 2026-27 is the first. The residency tests are the same in substance as under section 6 of the Income Tax Act, 1961. Only the section numbers and the name of the year changed.

The look back tests reach into years before 1 Apr 2026. For tax year 2026-27, the four preceding tax years are 2022-23 to 2025-26. Those were previous years under the 1961 Act. The CBDT transition FAQs (Q1.11) say section 536(3) reads a tax year beginning on or before 1 Apr 2025 as the corresponding previous year under the 1961 Act.

On our reading, days spent in India from 1 Apr 2022 to 31 Mar 2026 therefore count towards the 365 day and 729 day tests in 2026-27 and later. Residential status for FY 2025-26 itself is still decided under section 6 of the 1961 Act, for the return filed in 2026. Our explainer on the [tax year under the Income Tax Act, 2025](/insights/tax-year-income-tax-act-2025-previous-year-assessment-year) covers the wider change.

| Rule | Income Tax Act, 1961 | Income Tax Act, 2025 |
|---|---|---|
| Year for the test | Previous year | Tax year |
| 182 day rule | Section 6(1)(a) | Section 6(2)(a) |
| 60 day and 365 day rule | Section 6(1)(c) | Section 6(2)(b) |
| Citizen leaving for employment or as crew | Explanation 1(a) to section 6(1) | Section 6(3) |
| Citizen or person of Indian origin visiting India; 120 day rule | Explanation 1(b) to section 6(1) | Sections 6(4) and 6(5) |
| Deemed resident citizen | Section 6(1A) | Sections 6(7) and 6(8) |
| Not ordinarily resident | Section 6(6) | Section 6(13) |
| Scope of total income | Section 5 | Section 5 |
| Salary for services rendered in India | Section 9(1)(ii) | Section 9(3)(a) |
| 90 day short stay exemption | Section 10(6)(vi) | Schedule IV, serial 3 |
| Treaty relief | Section 90 | Section 159 |
| Salary TDS | Section 192 | Section 392 |
| Treaty claim form; Indian TRC application and certificate | Forms 10F, 10FA and 10FB | Forms 41, 42 and 43 |
| Salary certificate; quarterly salary TDS statement | Forms 16 and 24Q | Forms 130 and 138 |
| Foreign tax credit statement | Form 67 | Form 44 |
| Default tax regime | Section 115BAC | Section 202 |

Sources: Income Tax Act, 2025; CBDT form map for the Income Tax Rules, 2026; CBDT transition FAQs.

## How is a foreign employee's salary for work in India taxed?

Section 9(3)(a) of the Income Tax Act, 2025 deems salary earned in India to accrue in India. That covers pay for services rendered in India, and pay for rest or leave between periods of Indian service. So India taxes salary for work done here, wherever it is paid and whatever the employee's residential status.

This is the point most expatriates miss. A split payroll does not move income out of India. Where an employee works in India and the home company pays part of the salary abroad, both parts are salary for services rendered in India.

For days worked outside India, the answer depends on status. A non resident or RNOR is not taxed on salary for work abroad, unless it is received in India. So home salary for days worked abroad should be paid into a home bank account. A resident and ordinarily resident employee is taxed on worldwide salary and claims credit for foreign tax in Form 44.

Salary is taxed at the rates in section 202, the default regime, unless the employee exercises the option under section 202(4) with the return. For tax year 2026-27 the slabs start at nil on the first INR 4,00,000 and reach 30 percent above INR 24,00,000. Surcharge applies above INR 50,00,000, and 4 percent cess on top.

Equity awards follow the same source logic. Our note on [RSU and ESOP tax for employees of a foreign parent](/insights/esop-rsu-foreign-parent-indian-employees-tax) covers how India taxes the Indian share of an award.

## When is a short business visit exempt from Indian tax?

Two exemptions can take a short visitor's salary out of Indian tax. Schedule IV, serial 3 to the Income Tax Act, 2025 exempts a non citizen employee of a foreign enterprise for a stay of up to 90 days. A treaty employment article usually exempts stays of up to 183 days, on its own conditions.

Schedule IV, serial 3 applies through section 11. It replaced section 10(6)(vi) of the 1961 Act. All three of its conditions must hold:

1. The foreign enterprise is not engaged in any trade or business in India.
2. The stay in India does not exceed 90 days in aggregate in the tax year.
3. The remuneration is not liable to be deducted from the employer's income chargeable under the Act.

The treaty route is wider and has its own conditions. In the India Canada DTAA, Article 15(2) exempts employment income if three conditions hold. The employee is present for no more than 183 days in the relevant fiscal year. The employer is not resident in India. The pay is not borne by a PE or fixed base of the employer in India.

The India UK DTAA puts the rule in Article 16(2), with a different third condition. The remuneration must not be deductible in computing the profits of an enterprise chargeable to tax in India. So a UK salary recharged to the Indian subsidiary, and claimed as its expense, fails that condition.

| Feature | Schedule IV, serial 3 | Treaty employment article (Canada Article 15(2); UK Article 16(2)) |
|---|---|---|
| Who can use it | Non citizen employee of a foreign enterprise | Resident of the treaty country, after any tie breaker |
| Day limit | 90 days in the tax year | 183 days in the relevant fiscal year |
| Employer condition | Foreign enterprise not engaged in trade or business in India | Employer not resident in India |
| Cost condition | Pay not deductible from the employer's income chargeable in India | Canada: not borne by an Indian PE or fixed base. UK: not deductible by an enterprise taxable in India |
| Papers | None prescribed in the entry | TRC and Form 41 under section 159(8) |
| Effect | Salary for the Indian days is exempt | India does not tax the salary for the Indian days |

Sources: Schedule IV to the Income Tax Act, 2025; India Canada DTAA, Article 15; India UK DTAA, Article 16.

Sometimes the Indian company bears the visitor's salary through a recharge. A tax officer can then argue that an Indian resident employer pays it. We plan on that basis. A secondment needs its own structure, which our [secondment guide](/insights/secondment-of-employees-to-india-pe-gst-tds) covers, including the PE risk for the foreign employer.

## How does a treaty tie breaker decide residence?

An expatriate who is resident in India under section 6 and resident at home under home law is a dual resident. Article 4 of the treaty then decides residence for treaty purposes. The tests run in order: permanent home, centre of vital interests, habitual abode, nationality and finally mutual agreement.

Article 4(2) of the India Canada DTAA shows the order, and Article 4(2) of the India UK DTAA uses the same one:

1. **Permanent home.** The person is resident where they have a permanent home available.
2. **Centre of vital interests.** If they have a home in both countries, they are resident where personal and economic relations are closer.
3. **Habitual abode.** If that cannot be decided, or there is no home in either, they are resident where they have a habitual abode.
4. **Nationality.** If they have a habitual abode in both or neither, they are resident in the country of which they are a national.
5. **Mutual agreement.** If that still does not decide it, the competent authorities settle the question.

The tie breaker does not change status under the Income Tax Act, 2025. An employee who is resident under section 6 stays resident for Indian law. The treaty then limits what India may tax. A Canadian resident under the tie breaker can use Article 15 for the Indian salary, if its conditions hold.

A family that moves to India with the employee usually moves the centre of vital interests here. An employee who keeps a home and family abroad, and rents a serviced flat in India, usually keeps treaty residence at home. We record the facts for each test on the file before a claim is made.

## What does an expatriate need to claim treaty relief?

A foreign employee claiming a treaty exemption in India needs a home country TRC and Form 41. Section 159(8) of the Income Tax Act, 2025 requires both. Form 41 is filed online once per tax year. An expatriate who is resident in India and needs proof for the home country applies for an Indian TRC in Form 42.

The Form 41 guidance note says non resident individuals, companies and other entities file it to claim treaty benefits. PAN is not mandatory, and a person without PAN verifies with an OTP. The TRC must be uploaded and must be valid for the Indian tax year. The note states: "Benefit of DTAA is available only with filing of Form 41."

The Indian TRC runs the other way. Form 42 replaced Form 10FA, under sections 159(1) and 159(2) of the Act and rule 75(3) of the Income Tax Rules, 2026. The department issues the certificate in Form 43, the old Form 10FB. The application is made online with a PAN based login.

| Document | Who issues or files it | When it is needed | Source |
|---|---|---|---|
| TRC from the home country | Home tax authority | Any treaty claim in India | Section 159(8) |
| Form 41 (old Form 10F) | The employee, online | Once per tax year of the claim | Section 159(8)(b); rule 75 |
| Form 42 (old Form 10FA) | An Indian resident employee, online | To obtain an Indian TRC for the home country | Sections 159(1), 159(2); rule 75(3) |
| Form 43 (old Form 10FB) | Income Tax Department | The Indian TRC itself | Section 159 |
| Form 44 (old Form 67) | A resident employee | To claim credit in India for foreign tax | Income Tax Rules, 2026 form map |
| Day log with travel records | The employee, kept by the employer | Every residency test and short stay claim | Section 6; Schedule IV |

Our guide to [Form 10F and the tax residency certificate](/insights/form-10f-and-tax-residency-certificate-india) covers Form 41 step by step. Our note on [Form 67 and foreign tax credit](/insights/foreign-tax-credit-form-67-india) covers the Form 44 claim.

## What must the Indian employer do?

The Indian employer deducts tax under section 392 of the Income Tax Act, 2025. It applies the average rate to the employee's estimated salary for the tax year. It issues Form 130 and files Form 138 each quarter. It needs the employee's PAN, the day count and any treaty papers before it can apply an exemption.

Section 392(4)(a)(i) tells the employer to take into account salary from other employers that the employee declares. In a split payroll, we ask the home company for its pay figures each month. Section 392(8) requires salary paid in foreign currency to be converted to rupees at the prescribed rate.

Section 392(2) lets the employer pay the tax on non monetary perquisites itself, without deducting it from the employee. Expatriate packages often include housing and school fees. The tax paid this way counts as tax deducted at source.

For the quarter from January to March 2026, the salary TDS statement is still Form 24Q under the 1961 Act. From the first quarter of tax year 2026-27, Form 138 replaces it, as the CBDT transition FAQs (Q6.10) state. Our [payroll service](/services/payroll-management.html) runs these filings for subsidiaries with expatriate staff.

The employer also checks social security. A foreign employee may be an international worker under the EPF rules, unless a social security agreement and a certificate of coverage apply. Our note on [PF and ESI for expatriate staff](/insights/pf-esi-foreign-owned-company-international-workers) covers the rules. The visa and registration steps are in our guide to the [employment visa](/insights/employment-visa-india-for-foreign-employees).

## What changed in 2026

The residency tests did not change in substance in 2026. The section numbers, the name of the year and the forms changed when the Income Tax Act, 2025 came into force on 1 Apr 2026. The table in the tax year section above maps each rule.

| Change | Date | Instrument |
|---|---|---|
| Income Tax Act, 2025 receives assent | 21 Aug 2025 | Act 30 of 2025 |
| Income Tax Rules, 2026 notified, with Forms 41, 42, 43, 130, 138 and 44 | 20 Mar 2026 | G.S.R. 198(E), Notification 22/2026 |
| Act and Rules in force; tax year replaces previous year | 1 Apr 2026 | Income Tax Act, 2025, section 3 |
| Schedule IV, serial 13B added for individuals who render services in India under a notified scheme | 1 Apr 2026 | Act No. 4 of 2026 |
| Form 138 replaces Form 24Q for salary TDS statements | Quarter from 1 Apr 2026 | Income Tax Rules, 2026 |

Sources: Income Tax Act, 2025; Schedule IV footnotes on incometaxindia.gov.in; CBDT transition FAQs.

### What has happened since 22 Jan 2026

1. **20 Mar 2026.** CBDT notified the Income Tax Rules, 2026. Form 41, Form 42 and the new salary forms took legal effect from 1 Apr 2026.
2. **1 Apr 2026.** The Income Tax Act, 2025 came into force, with section 6 and Schedule IV as described on this page.
3. **1 Apr 2026.** Schedule IV, serial 13B took effect, as inserted by Act No. 4 of 2026. It exempts foreign income of an individual who renders services in India under a scheme the Central Government notifies.

Serial 13B has tight conditions. The individual must have been non resident for the five consecutive tax years immediately before the tax year of the first visit for the scheme. The exemption lasts at most five consecutive tax years, and covers only income accruing outside India. It helps only once the Central Government notifies a scheme. The Schedule IV page on incometaxindia.gov.in names no scheme as at 23 Oct 2026, so check the CBDT notifications before relying on serial 13B.

## Worked example

### Lena moves to Pune for three years

Lena is a German engineer with no Indian origin. She visited India for 20 days in each of 2023-24, 2024-25 and 2025-26. She joins IndiaCo Private Limited in Pune on an employment visa on 1 Aug 2026. Assume she spends every day in India from then on.

In tax year 2026-27 she is in India from 1 Aug 2026 to 31 Mar 2027. That is 31 + 30 + 31 + 30 + 31 + 31 + 28 + 31 = 243 days. She is resident under section 6(2)(a). She was non resident in all ten preceding years, so she is RNOR under section 6(13)(a)(i).

| Tax year | Days in India in the year | Days in the seven preceding tax years | Resident years in the ten preceding tax years | Status |
|---|---|---|---|---|
| 2026-27 | 243 | 60 | 0 | RNOR under 6(13)(a)(i) and (ii) |
| 2027-28 | 366 | 303 | 1 | RNOR under 6(13)(a)(i) and (ii) |
| 2028-29 | 365 | 669 | 2 | RNOR under 6(13)(a)(ii) only |
| 2029-30 | 365 | 1,034 | 3 | Resident and ordinarily resident |

Tax year 2027-28 has 366 days because it includes 29 Feb 2028. In 2028-29 she fails the nine of ten test, but 669 days is within the 729 day limit. In 2029-30 she fails both, so India taxes her worldwide income from then.

While RNOR, the rent from her flat in Munich stays outside Indian tax, unless it is paid into India. Her IndiaCo salary is taxed in full. Assume her taxable salary for 2026-27, after allowed deductions, is INR 45,00,000 under the section 202 slabs.

1. **Nil** on the first INR 4,00,000.
2. **INR 20,000** at 5 percent on INR 4,00,001 to INR 8,00,000.
3. **INR 40,000** at 10 percent on the next INR 4,00,000.
4. **INR 60,000** at 15 percent on the next INR 4,00,000.
5. **INR 80,000** at 20 percent on the next INR 4,00,000.
6. **INR 1,00,000** at 25 percent on the next INR 4,00,000.
7. **INR 6,30,000** at 30 percent on the INR 21,00,000 above INR 24,00,000.

Tax is INR 9,30,000. Income is below INR 50,00,000, so no surcharge applies. Cess at 4 percent adds INR 37,200, for INR 9,67,200. IndiaCo spreads that over her monthly payroll under section 392.

### Marc, the frequent visitor from Canada

Marc is a Canadian project director employed by CanCo Inc. in Ottawa, where his family lives. He spent 100 days in India in each of 2022-23 to 2025-26, working at CanCo's Indian subsidiary. In 2026-27 he spends 70 days in India. He stays in hotels while in India. His annual salary of INR 1,46,00,000 equivalent is paid in Canada.

The four preceding tax years hold 400 days, which is 365 or more. His 70 days are 60 or more. So he is resident in 2026-27 under section 6(2)(b), though he never reached 182 days. In 2025-26 the four preceding years held only 300 days, as he made no visit in 2021-22, so he was non resident then.

He is RNOR under section 6(13)(a)(i), so only income from India is in play. His salary for the 70 Indian days is INR 1,46,00,000 × 70 / 365 = INR 28,00,000. Section 9(3)(a) deems it to accrue in India, though Canada pays it.

Marc is also resident in Canada. His permanent home is in Ottawa, so Article 4(2)(a) of the India Canada DTAA makes him a Canadian resident for the treaty. Article 15(2) then exempts the Indian salary, because three conditions hold:

1. **He is present in India for 70 days**, within 183 days in the relevant fiscal year.
2. **CanCo is not resident in India.**
3. **The salary is not borne by a PE or fixed base of CanCo in India.**

He needs a CRA certificate of residency and Form 41 for tax year 2026-27. Without the treaty, assume his taxable Indian salary after deductions is the full INR 28,00,000. Tax under section 202 is INR 4,20,000, and 4 percent cess takes it to INR 4,36,800.

If CanCo recharges Marc's salary to the subsidiary, the officer can argue condition 3 fails. The days also raise a separate question for CanCo. Article 5(2)(l)(ii) of the treaty treats services performed in India for a related enterprise as a PE. Our [India Canada DTAA guide](/insights/india-canada-dtaa-for-companies) covers that risk.

### Sophie, the short visitor from London

Sophie works for a UK company with no business in India. In 2026-27 she spends 75 days in India meeting suppliers, on her first visits. She is non resident: 75 days is below 182, and her four preceding years hold no days.

Her salary for the 75 days is deemed to accrue in India under section 9(3)(a). Schedule IV, serial 3 exempts it, because the stay is within 90 days and her employer has no business in India. The UK company does not deduct her pay against Indian income. No papers are prescribed, but we keep her travel log and an employer letter on file.

Had she stayed 120 days, serial 3 would fail. Article 16(2) of the India UK DTAA would then exempt the salary. Her 120 days are within 183, and her employer is not resident in India. Her pay is also not deducted by an enterprise taxable in India. She would then need a UK TRC and Form 41.

## Common mistakes

1. **Checking only the 182 day rule for frequent visitors.** Fix: run the 60 day test every year with a rolling five year day log.
2. **Treating RNOR status as freedom from Indian tax.** Fix: tax Indian salary in full; RNOR status shelters only foreign income.
3. **Paying home salary for Indian workdays offshore and leaving it out.** Fix: section 9(3)(a) taxes salary for work in India wherever it is paid.
4. **Paying salary for workdays abroad into an Indian account.** Fix: pay it into a home account, since income received in India is taxable.
5. **Claiming a treaty exemption without papers.** Fix: obtain the home TRC and file Form 41 before the employer stops deducting tax.
6. **Recharging a visitor's salary to the Indian company while claiming the 183 day exemption.** Fix: read the treaty's cost condition first.
7. **Applying the 120 day rule to a foreign national.** Fix: section 6(5) covers only citizens and persons of Indian origin.
8. **Quoting old section numbers in the employment file.** Fix: cite section 6 of the 2025 Act and the tax year from 2026-27.

## Checklist

1. Record each employee's arrival and departure dates from passport stamps and tickets.
2. Count the days in India in the tax year, including arrival and departure days.
3. Add up the days in the four preceding tax years for the 60 day test.
4. Check whether the employee is an Indian citizen or a person of Indian origin.
5. Test RNOR status under each limb of section 6(13).
6. Split salary between days worked in India and days worked abroad.
7. Check Schedule IV, serial 3 for visits of up to 90 days.
8. Read the employment article and tie breaker in the treaty for longer stays.
9. Collect the home TRC and file Form 41 before relying on a treaty.
10. Set up TDS under section 392, including salary paid by the home company.
11. Issue Form 130 and file Form 138 each quarter.
12. Apply in Form 42 for an Indian TRC when the employee needs one at home.
13. File Form 44 with the return where a resident employee claims foreign tax credit.

To have us run a day count or treaty review for an expatriate, send the travel log and contract through our [contact page](/contact).

## Key terms

- **Resident but not ordinarily resident (RNOR)**: An individual who is resident in India for a tax year but meets one of the tests in section 6(13) of the Income Tax Act, 2025, such as non residence in nine of the ten preceding tax years. India taxes such a person mainly on Indian income and income received in India. (https://krystal7.com/glossary#resident-but-not-ordinarily-resident)
- **Tax year (Income Tax Act, 2025)**: The twelve months of the financial year starting on 1 April, defined in section 3 of the Income Tax Act, 2025. It replaced the "previous year" of the 1961 Act from 1 April 2026. A new business starts its first tax year on the date it is set up. (https://krystal7.com/glossary#tax-year-income-tax-act-2025)
- **Deemed resident Indian citizen**: An Indian citizen treated as resident under section 6(7) of the Income Tax Act, 2025 because they are not liable to tax in any other country by reason of domicile or residence, and their total income other than income from foreign sources exceeds INR 15,00,000. (https://krystal7.com/glossary#deemed-resident-indian-citizen)
- **Short stay exemption**: The exemption in Schedule IV, serial 3 to the Income Tax Act, 2025 for salary of a non citizen employee of a foreign enterprise with no business in India, where the stay in India does not exceed 90 days in the tax year. It replaced section 10(6)(vi) of the 1961 Act. (https://krystal7.com/glossary#short-stay-exemption)
- **Treaty tie breaker rule**: The rule in Article 4 of a DTAA that decides residence for treaty purposes when an individual is resident in both countries under their domestic laws. It tests permanent home, centre of vital interests, habitual abode and nationality in turn, then mutual agreement. (https://krystal7.com/glossary#treaty-tie-breaker-rule)
- **Tax Residency Certificate (TRC)**: A TRC is the certificate a payee's home tax authority issues to confirm its tax residence there for a period. Section 159(8)(a) of the Income Tax Act, 2025 makes it a condition for treaty relief in India, alongside Form 41. An Indian resident applies for one in Form 42 and receives it in Form 43. (https://krystal7.com/glossary#tax-residency-certificate)
- **Form 41 (old Form 10F)**: Form 41 is the online statement a non resident files on the income tax portal to claim treaty benefits under section 159(8) of the Income Tax Act, 2025. It replaced Form 10F from 1 Apr 2026. Rule 75 of the Income Tax Rules, 2026 requires it once per tax year, and payers ask for it before the first payment. (https://krystal7.com/glossary#form-41-old-form-10f)

## Frequently Asked Questions

### What is the 182 day rule for tax residency in India?

Section 6(2)(a) of the Income Tax Act, 2025 sets the rule. An individual who spends 182 days or more in India in a tax year is resident for that year. The days need not be continuous. The rule applies to foreign and Indian nationals alike, and replaced section 6(1)(a) of the 1961 Act from 1 Apr 2026.

### Can a foreign employee be resident in India with fewer than 182 days?

Yes. Under section 6(2)(b), 60 days in India in the tax year is enough. The condition is 365 days or more in India in the four preceding tax years. Frequent visitors, such as regional heads, often meet this test without noticing.

### Does the 120 day rule apply to foreign nationals?

Only to foreign nationals of Indian origin. Section 6(5) of the Income Tax Act, 2025 applies the 120 day test to a visiting citizen or person of Indian origin. Their income other than from foreign sources must exceed INR 15,00,000. Other foreign nationals face the 60 day test in section 6(2)(b).

### What is resident but not ordinarily resident status?

It is a resident individual who meets a test in section 6(13) of the Income Tax Act, 2025. The main tests are non residence in nine of the ten preceding tax years, or 729 days or less in the seven preceding years. India then taxes mainly Indian income and income received in India.

### How long does a foreign employee stay not ordinarily resident?

It depends on past years. A first time expatriate who arrives mid year and stays full time is usually RNOR for three tax years under section 6(13). The 729 day limb normally outlasts the nine of ten limb. After that the employee becomes resident and ordinarily resident, taxed on worldwide income.

### Is salary for work in India taxable if it is paid abroad?

Yes. Section 9(3)(a) of the Income Tax Act, 2025 deems salary for services rendered in India to accrue in India, wherever it is paid. So a split payroll leaves the foreign paid part taxable in India. Only Schedule IV, serial 3 or a treaty employment article can exempt it.

### Is a business visitor taxable in India for a 60 day trip?

Usually not, if Schedule IV, serial 3 applies. It exempts a non citizen employee of a foreign enterprise with no business in India. The stay must not exceed 90 days in the tax year. The pay must not be deductible from the employer's Indian taxable income. Otherwise a treaty article may exempt it.

### What is the short stay exemption under India's tax treaties?

It is the employment article, such as Article 15(2) of the India Canada DTAA or Article 16(2) of the India UK DTAA. It exempts salary for work in India where the stay is within 183 days in the fiscal year and a non resident employer pays. The cost condition differs by treaty.

### How does the treaty tie breaker work for an expatriate?

Article 4 of the treaty decides residence when both countries treat the person as resident. It tests permanent home, then centre of vital interests, then habitual abode, then nationality, then mutual agreement. The result limits what India may tax, but status under section 6 of the Income Tax Act, 2025 stays the same.

### Which form does a foreign employee file to claim treaty relief in India?

They file Form 41, the old Form 10F. It is prescribed under section 159(8)(b) of the Income Tax Act, 2025 and rule 75 of the Income Tax Rules, 2026. It is filed online once per tax year, with the home country TRC uploaded. PAN is optional. The guidance note says treaty benefit is available only with Form 41.

### How does an expatriate resident in India get an Indian tax residency certificate?

They apply online in Form 42, the old Form 10FA. The form rests on sections 159(1) and 159(2) of the Income Tax Act, 2025 and rule 75(3) of the Rules. The department issues the certificate in Form 43, the old Form 10FB. The application needs a PAN based login on the income tax portal.

### What is deemed residency for Indian citizens?

Section 6(7) of the Income Tax Act, 2025 deems some Indian citizens resident. It covers a citizen not liable to tax in any other country by reason of domicile or residence. Their income other than from foreign sources must exceed INR 15,00,000. Such a citizen is RNOR under section 6(13)(c).

### Does the Income Tax Act, 2025 change the 182 day rule?

No. The 182 day rule moved from section 6(1)(a) of the 1961 Act to section 6(2)(a) of the 2025 Act on 1 Apr 2026. Its substance did not change. The year is now called the tax year. Days in earlier previous years still count towards the look back tests.

### Do the days of arrival and departure count as days in India?

Section 6 of the Income Tax Act, 2025 does not say how to count part days. We count both the arrival and the departure day as days in India, which is the cautious reading. We build the count from passport stamps and tickets, and keep the log on the employee's file.

### What does the Indian employer deduct from an expatriate's salary?

Section 392 of the Income Tax Act, 2025 makes the employer deduct tax at the average rate on the estimated salary for the year. It includes salary paid by other employers that the employee declares. Foreign currency salary is converted at the prescribed rate under section 392(8).

## Sources

- Income Tax Department, Section 6 of the Income Tax Act, 2025 (residence in India), read 23 Oct 2026, https://www.incometaxindia.gov.in/w/section-6-1
- Income Tax Department, Section 2 of the Income Tax Act, 2025 (definitions, clause (78) person of Indian origin), read 23 Oct 2026, https://www.incometaxindia.gov.in/w/section-2-1
- Income Tax Department, Section 5 of the Income Tax Act, 2025 (scope of total income), https://www.incometaxindia.gov.in/w/section-5-1
- Income Tax Department, Section 9 of the Income Tax Act, 2025 (income deemed to accrue or arise in India), https://www.incometaxindia.gov.in/w/section-9-1
- Income Tax Department, Schedule IV to the Income Tax Act, 2025 (income of eligible non residents not included in total income), read 23 Oct 2026, https://www.incometaxindia.gov.in/w/schedule-iv-4
- Income Tax Department, Section 202 of the Income Tax Act, 2025 (default tax regime), https://www.incometaxindia.gov.in/w/section-202-78
- Income Tax Department, Section 392 of the Income Tax Act, 2025 (salary TDS), https://www.incometaxindia.gov.in/w/section-392-6
- Income Tax Department, Section 159 of the Income Tax Act, 2025 (double taxation relief), https://www.incometaxindia.gov.in/w/section-159-89
- Income Tax Department, First Schedule to the Finance Act, 2026 (surcharge), https://www.incometaxindia.gov.in/w/first-schedule-104
- Income Tax Department, Guidance notes on Form 41 and Form 42, https://www.incometaxindia.gov.in/documents/d/guest/fn-41, https://www.incometaxindia.gov.in/documents/d/guest/fn-42
- Income Tax Department, FAQs and Guidance Notes on Forms as per Income Tax Rules, 2026 (form map), https://www.incometaxindia.gov.in/faqs-and-guidance-notes-on-forms-as-per-income-tax-rules-2026
- Central Board of Direct Taxes, FAQs on the transition to the Income Tax Act, 2025 (Q1.9 to Q1.11, Q2.3, Q6.10), https://www.incometaxindia.gov.in/documents/81799/11848482/FAQs-on-Interplay-and-Transition.pdf/05f80c1a-073c-a5d7-fb6f-55509242be53?t=1774082865717
- Income Tax Department, India Canada DTAA (Articles 4 and 15), https://www.incometaxindia.gov.in/w/canada-comprehensive-agreements-1
- Income Tax Department, India UK DTAA (Articles 4 and 16), https://www.incometaxindia.gov.in/w/uk-comprehensive-agreements-1

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