Many NRIs assume that spending a few extra weeks in India has no tax consequences. However, Indian income tax law contains a critical rule that can silently change your tax residency. Crossing 120 days in India, when combined with certain income thresholds, can expose NRIs to significantly higher tax liability. In 2026, this remains one of the most expensive and misunderstood tax traps for overseas Indians.
What Is the 120-Day Rule?
Earlier, NRIs could stay in India for up to 182 days without losing NRI status. However, if an individual’s Indian income exceeds ₹15 lakh in a financial year, the permissible stay is reduced to 120 days. If both these conditions are met, the individual may no longer qualify as an NRI for tax purposes.
What Happens After Crossing 120 Days?
Crossing this threshold often results in RNOR (Resident but Not Ordinarily Resident) status. This expands the scope of income taxable in India and increases reporting obligations, even if you continue to live abroad.
Why This Can Cost Lakhs
Once residency status changes, certain NRI exemptions disappear. Tax rates may increase, compliance becomes stricter, and refund timelines often stretch into years. Many NRIs discover this only after receiving a tax notice
Common Situations Where NRIs Get Caught
Extended family visits, medical treatment in India, working remotely during visits, or multiple short trips that add up to 120 days can all trigger this rule unintentionally.
Key Takeaway
The 120-day rule is purely numerical. Tracking your stay and income together is essential to avoid unexpected tax exposure.
Frequently Asked Questions
1. What is the 120-day rule for NRIs?
The 120-day rule states that if an NRI earns more than ₹15 lakh from Indian sources and stays in India for over 120 days in a financial year, their tax residency can change from NRI to RNOR, increasing their tax exposure .
2. Earlier NRIs could stay 182 days—why did this change?
The old 182-day limit still applies to many NRIs, but once Indian income crosses ₹15 lakh, the permitted stay reduces to 120 days. This was introduced to prevent long stays in India while claiming NRI benefits .
3. What happens if I cross 120 days in India?
You may become Resident but Not Ordinarily Resident (RNOR). This widens the scope of taxable income in India, increases compliance requirements, and can remove several NRI exemptions .
4. Does crossing 120 days automatically make me a resident?
No. Both conditions must be met:
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Indian income above ₹15 lakh, and
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Physical stay exceeding 120 days in that financial year.
5. Which incomes are counted in the ₹15 lakh threshold?
Rental income, capital gains from property, interest from Indian accounts, dividends, and any other India-sourced earnings are included.
6. Can short multiple trips trigger the rule?
Yes. The rule counts total days in the financial year. Several small visits can unintentionally add up to over 120 days .
7. What are the financial risks?
Higher tax rates, loss of exemptions, stricter reporting, and long refund delays can collectively cost NRIs lakhs of rupees .
8. How can NRIs avoid this trap?
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Track travel days carefully
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Plan property sales and income timing
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Consider DTAA benefits
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Take residency planning before long India visits
9. Does RNOR mean global income becomes taxable?
Generally no, but certain foreign incomes linked to Indian business or profession may become taxable. Compliance complexity increases significantly.
10. I already crossed 120 days—what should I do?
Consult a tax advisor immediately, evaluate RNOR position, file returns correctly, and plan the next year’s stay to regain NRI status.
