How Long Can an NRI Stay in India Without Losing Tax Status?

If you're an NRI wondering how long you can stay in India without shaking up your tax status or your mutual fund investments, you're not alone. Thousands of NRIs return home for holidays, family visits, or even long-term stays-only to find out later that their tax rules changed, their mutual fund gains got hit with higher taxes, or their SIPs got locked into a new category. The truth? NRI stay in India isn't just about visas. It’s about tax residency, and that directly affects how your mutual funds are taxed.

What Determines Your NRI Status in India?

Your residential status in India isn’t decided by your passport or your bank account. It’s decided by how many days you spend in India during a financial year (April 1 to March 31). The rules are simple but strict:

• You’re an NRI if you’re in India for less than 182 days in a financial year.
• If you’re in India for 182 days or more, you become a Resident (but not necessarily Ordinarily Resident).
• If you were an NRI for 9 out of the last 10 years AND were in India for less than 729 days in the last 7 years, you can still be classified as RNOR (Resident but Not Ordinarily Resident) even if you stay over 182 days.

That last one-RNOR-is critical. It gives you a 2-year buffer. During those two years, you keep the same tax benefits as an NRI, including lower tax rates on mutual fund gains. After that, you’re treated like a regular Indian resident.

Why Does This Matter for Mutual Funds?

Your tax rate on mutual fund gains changes completely based on your residential status. Here’s what happens:

• As an NRI: Equity funds held over 1 year = 10% LTCG tax (no indexation). Debt funds held over 3 years = 20% LTCG with indexation.
• As a Resident: Equity funds held over 1 year = 10% LTCG (same). But debt funds held over 3 years = 20% LTCG without indexation-meaning you pay way more tax.

That difference isn’t small. Say you invested ₹5 lakh in a debt fund and held it for 4 years. As an NRI, indexation might reduce your taxable gain by 30-40%. As a resident, you pay tax on the full gain. That could mean paying ₹30,000-₹50,000 extra in taxes.

Also, TDS (tax deducted at source) kicks in differently. NRIs have TDS at 30% on redemptions, but residents have TDS at 10% on equity funds (if gains exceed ₹1 lakh) and 10-20% on debt funds depending on income slab. If you’re staying longer than expected and didn’t update your status with your fund house, you could be overpaying-or worse, underpaying and facing a notice from the tax department.

What Happens If You Stay More Than 182 Days?

If you cross the 182-day mark, you automatically become a Resident for tax purposes. That doesn’t mean you lose your mutual fund account. But your tax treatment changes from day one. Your fund house will update your KYC status to “Resident” and start applying resident tax rules.

Here’s what you need to do:

1. Log in to your mutual fund portal and update your residential status under KYC.
2. Check if your SIPs are still active-some platforms pause NRI SIPs if you’re in India too long.
3. Review your portfolio. If you’re holding debt funds, consider switching to equity funds before your status changes. Equity LTCG tax stays the same for both NRI and resident, but debt funds get much more expensive.
4. Don’t assume your NRI status is still valid just because you’re on a tourist visa. The tax law doesn’t care about your visa type-it cares about days spent in India.

Can You Avoid Losing NRI Status?

Yes-but only if you plan ahead. If you know you’ll be in India for more than 182 days, you can still keep your NRI status if you meet the RNOR condition:

• You were an NRI in at least 9 of the last 10 financial years.
• Your total stay in India in the last 7 financial years was less than 729 days.

If you qualify, you can stay up to 2 years as an RNOR and keep NRI tax benefits. But you must file Form 15CA/15CB for repatriation of funds, and your fund house must have your RNOR status recorded.

Many NRIs don’t realize they qualify for RNOR. If you’ve been working abroad for 10+ years and just came home for a few months to care for aging parents, you might still be protected. Check your past tax filings and travel records.

What About SIPs and Lump-Sum Investments?

When you’re an NRI, you can invest in mutual funds through NRE or NRO accounts. NRE accounts are tax-free in India, so gains from funds bought through NRE are tax-free for NRIs. But if you become a resident, those gains become taxable.

Here’s the catch: if you started a SIP as an NRI and then stay in India longer than 182 days, your SIP doesn’t automatically stop. But your tax status changes mid-way. That means:

• Units bought before you became a resident: taxed as NRI.
• Units bought after you became a resident: taxed as resident.

That’s messy. Fund houses don’t track this automatically. You need to calculate your cost of acquisition separately for each batch of units. Most people don’t. And that’s how people end up paying double tax or getting notices from the IT department.

Best practice? If you know you’ll be in India for more than 6 months, pause your NRI SIPs. Restart them as a resident investor. Or switch to a direct plan with a different fund house that can handle your new status cleanly.

How to Check Your Status and Update It

You can check your current residential status on the NSDL or CAMS portal where you hold your mutual funds. Log in, go to your profile, and look for “Residential Status.” If it says “NRI” but you’ve been in India for 200 days this year, it’s outdated.

To update it:

1. Download Form 60 (for those without PAN) or update your PAN details.
2. Submit proof of overseas address (utility bill, visa, employment letter).
3. Update your bank account type (NRE/NRO) with the fund house.
4. Notify your fund house in writing-email isn’t enough. Send a signed letter.

Most fund houses take 7-10 days to process the change. Don’t wait until you’re redeeming to fix this. If you’ve been in India for over 182 days and haven’t updated, you’re already non-compliant.

What Happens If You Ignore This?

Ignoring your residential status doesn’t make the problem go away. The tax department can:

• Reassess your past 6 years of mutual fund gains.
• Apply resident tax rates retroactively.
• Charge interest at 1% per month on unpaid tax.
• Impose penalties up to 200% of the tax evaded.

There’s no statute of limitations on tax fraud. If you were an NRI but claimed lower tax rates while living in India, you’re at risk.

One case from 2024 involved an NRI who stayed in India for 210 days while running a family business. He didn’t update his status. When he redeemed ₹1.2 crore in mutual funds, the fund house reported it as an NRI transaction. The tax department caught it. He owed ₹18.5 lakh in back taxes, interest, and penalties.

Bottom Line: Plan Your Stay, Protect Your Investments

There’s no magic number that lets you stay in India forever as an NRI. But you can stretch your benefits if you understand the rules. If you’re planning a long visit:

• Count your days. Use a calendar app to track your stay.
• Update your status before you hit 182 days.
• Don’t assume your fund house will do it for you.
• If you qualify for RNOR, use it-it’s your legal loophole.
• Keep records of your overseas income, visa stamps, and employment proof.

Staying in India longer doesn’t mean you have to give up your mutual funds. But it does mean you have to play by new rules. The difference between NRI and resident tax treatment can cost you tens of thousands of rupees. Don’t wait for a notice. Check your status today.