Do you have to pay tax in India or abroad? Why your residential status is important factor

There are many individuals who keep traveling abroad for work or any other purpose and earn income there. However, when it comes to paying income tax on their income, they may be confused about whether they need to pay it in India or abroad, or in either country. It may depend on a lot of factors, among which residential status for the relevant tax year is an important one.

The basic conditions for determining an individual's residential status remain unchanged under the Income Tax Act, 2025.

Under Section 6 of the Income Tax Act, 2025, an individual will continue to be treated as a tax resident if they stay in India for 182 days or more during the relevant tax year.

An individual can also qualify as a resident if they stay in India for 60 days or more during the relevant tax year and have stayed in India for 365 days or more during the preceding four years.

These conditions are the same as those prescribed under Section 6(1) of the Income Tax Act, 1961.

Has the basic test of residence for individuals changed under the Income Tax Act, 2025?

As per Frequently Asked Questions (FAQs) available on the Income Tax Department’s website, “No change has been made in the basic conditions for determining individual residency. Under Section 6 of the Income Tax Act, 2025, an individual continues to be treated as a taxresident if he stays in India for 182 days or more in the relevant tax year, or for 60 days or more in that year coupled with 365 days or more in the preceding four years. These conditions are identical to Section 6(1) of the Income Tax Act, 1961.”

When will the new residential status rules apply?

The residential status provisions under Section 6 of the Income Tax Act, 2025, apply only to tax years beginning on or after April 1, 2026.

For these tax years, the determination of whether an individual is a resident, non-resident, deemed resident, or not ordinarily resident will be governed by the new Income Tax Act, 2025.

There is no overlapping application of the two Acts for the same tax year. The relevant dividing line is the commencement date of the tax year and not the date on which the tax proceedings take place.

What happens if your stay in India spans both tax regimes?

Residential status is determined separately for each tax year.

Where an individual’s stay in India extends across financial years 2025 –26 and 2026 –27, the tax residency for FY 2025 –26 (AY 2026 –27) will be determined based on the period of stay up to March 31, 2026, in accordance with the provisions of the Income Tax Act, 1961.

For FY 2026 –27, residential status will be determined under the provisions of the Income Tax Act, 2025, and the period of stay from April 1, 2026, onwards will be considered for this purpose.

However, while applying the “60 days (stay in the relevant tax year) + 365 days (stay in the preceding four tax years)” test, the stay during FY 2025-26 and earlier years shall also be taken into account, as relevant, as per the Income Tax website.