What is the 120-day NRI rule under India's new Income Tax Act 2025?

Under the new Act, if your Indian-sourced income exceeds ₹15 lakh in a financial year and you spent between 120 and 181 days in India, you can be classified as Resident but Not Ordinarily Resident (RNOR). This is stricter than the old 182-day threshold and can affect Indians in Germany who visit India frequently for work or family.

Does the new Indian Income Tax Act 2025 change the DTAA between India and Germany?

The DTAA treaty itself remains unchanged, but the new Act consolidates how treaty benefits are claimed. You still get credit for taxes paid in India against your German liability, but the residency classification changes can alter which income India is allowed to tax in the first place.

Can I become an Indian tax resident even if I live in Germany full-time?

Yes, in rare cases. If your total Indian-sourced income exceeds ₹15 lakh and you are not a tax resident in any country (e.g., during a relocation year), the deemed residency rule can classify you as an Indian resident. However, if you are a German tax resident with a Wohnsitz in Germany, the DTAA tie-breaker rules will typically resolve this in Germany's favour.

What should Indians in Germany do now that the new Income Tax Act 2025 is live?

Track your days spent in India carefully each financial year, review any Indian income sources that exceed ₹15 lakh, ensure you are claiming DTAA credits correctly in both countries, and consult a Steuerberater or qualified tax advisor if your situation involves cross-border income above these thresholds.

India's New Income Tax Act 2025: How the 120-Day NRI Rule and DTAA Changes Affect Indians in Germany

India Just Rewrote Its Tax Code — Here's What It Means for You in Germany

If you're an Indian living in Germany — whether you're a Blue Card holder in Munich, a PhD student in Berlin, or a family settled in Frankfurt — you've probably heard the news: India's new Income Tax Act 2025 officially replaced the six-decade-old Income Tax Act of 1961 starting April 1, 2026.

The new law is supposed to be simpler. Shorter. More modern. And in many ways, it is.

But buried inside the streamlined sections are some residency and NRI rules that directly affect you — especially if you visit India regularly, earn rental income back home, hold Indian investments, or send money to family.

Let's break down exactly what changed and what you need to do.

The Big Change: The 120-Day NRI Rule Is Now Permanent Law

Under the old Act, you were generally considered a Non-Resident Indian (NRI) if you spent fewer than 182 days in India during a financial year. Simple enough.

But starting from the 2020 amendments (and now cemented into the new 2025 Act), there's a lower threshold of 120 days that can trip you up:

If your Indian-sourced income exceeds ₹15 lakh (roughly €16,725 at the current RBI rate) in a financial year, AND
You spent 120 days or more in India during that year

…then India can classify you as "Resident but Not Ordinarily Resident" (RNOR).

This doesn't make you a full resident — RNOR status means India only taxes your Indian-sourced and India-received income — but it's a significant shift from the old 182-day safety net many NRIs relied on.

⚠️The 120-day trap for frequent visitors

This rule catches Indians in Germany who visit home for extended periods — say, 4 months of remote work from India, a long family visit combined with a project stint at the Indian office, or parental care during summer. If you also have rental income, capital gains, or FD interest pushing you past ₹15 lakh, you could unexpectedly become RNOR.

Who is most at risk?

IT professionals whose German employer has an Indian subsidiary and who work from India for extended stretches
Families with significant rental income from property in India (a 2BHK in Bangalore earning ₹40,000/month adds up fast when combined with FD interest and capital gains)
PhD students or researchers who return to India for fieldwork spanning several months

The "Deemed Resident" Rule: Still There, Still Scary

The new Act also retains the deemed residency provision. Here's how it works:

If your Indian-sourced income exceeds ₹15 lakh AND you are not a tax resident of any other country, India will deem you a resident — even if you spent zero days in India.

Now, if you're living in Germany with a registered address (Wohnsitz), you're almost certainly a German tax resident. So the DTAA tie-breaker rules would resolve any dual-residency conflict in Germany's favour.

But there's a window of vulnerability: the year you relocate. If you moved to Germany partway through the Indian financial year and hadn't yet established tax residency in Germany, you could technically fall into this deemed-resident category.

📘Scenario: Arjun moves to Germany mid-year

Arjun relocated from Hyderabad to Stuttgart on August 15, 2026. He earned ₹22 lakh in Indian salary (April–August) before starting his German job. He spent 137 days in India that FY. Under the new Act, his Indian income exceeds ₹15 lakh and he crossed 120 days — making him RNOR in India. Meanwhile, Germany considers him resident from August onward. For FY 2026–27, Arjun is taxed in both countries on overlapping income and needs the DTAA to sort out credits. This is the year to get professional help.

What Actually Changed vs. the Old Act?

Let's be precise. The India–Germany DTAA treaty itself has not been rewritten. It still works the same way: you claim a credit in one country for taxes paid in the other, and tie-breaker rules determine residency for treaty purposes.

What the new Act does is consolidate and clarify how these provisions interact with domestic law:

The practical impact isn't a dramatic overhaul — it's that the rules many NRIs hoped were temporary amendments are now permanent features of India's tax code.

A Worked Example: How This Hits Your Wallet

Let's say you're Meera, a software engineer in Berlin earning €72,000 per year. Back in India, you have:

FD interest: ₹3,50,000
Rental income from a flat in Pune: ₹6,00,000 per year
Capital gains from mutual fund redemption: ₹7,00,000

Your total Indian-sourced income: ₹16,50,000 — just over the ₹15 lakh threshold.

You visited India for a family wedding, Diwali, and worked remotely for 3 weeks. Total days in India: 125 days.

Result under the new Act: Meera is classified as RNOR. India taxes her Indian-sourced income. Germany also taxes her worldwide income (including Indian income). She needs to use the DTAA to avoid double taxation.

Without properly claiming the DTAA credit, Meera would pay €6,807 + €2,342 = €9,149 in total tax on her Indian income. With the DTAA credit correctly applied, she pays €6,807 total — saving her €2,342.

🧮DTAA credit formula (simplified)

German tax due on foreign income = (Foreign income × German marginal rate) − Credit for tax already paid in India. The credit is capped at the lower of: (a) actual Indian tax paid, or (b) German tax attributable to that income. You claim this in your German Steuererklärung using Anlage AUS.

Your Action Plan: 5 Things to Do Right Now

Whether you're a salaried employee, a student with Indian investments, or a family with property back home — here's your checklist:

1. Track Your Days in India Religiously

Use a spreadsheet or app. Count every calendar day — arrival and departure days both count. If you're anywhere near 120 days and have Indian income above ₹15 lakh, this is critical.

2. Get Your Tax Residency Certificate (TRC) from Germany

You need this to claim DTAA benefits in India. Request it from your local Finanzamt — the form is called Ansässigkeitsbescheinigung. It usually takes 2–4 weeks.

3. Calculate Your Indian-Sourced Income Accurately

Add up all Indian sources: FD interest, rental income, capital gains, dividend income, EPF withdrawals, LIC maturities. If you're near the ₹15 lakh line, even small amounts matter.

4. File in Both Countries — Correctly

In Germany, declare your Indian income in Anlage AUS and claim the DTAA credit. In India, file as NRI or RNOR (depending on your status) and ensure TDS is correctly applied.

5. Consult a Professional for Complex Cases

If you relocated mid-year, have income in both countries exceeding thresholds, or are unsure about your residency status — please talk to a Steuerberater or cross-border tax advisor. The interaction between the new Indian Act and German tax law has enough nuances that generic advice won't cut it.

💡Pro tip: The ₹15 lakh threshold is easier to hit than you think

Many Indians in Germany don't realize that a combination of modest FD interest (₹2L), one mutual fund redemption (₹5L), and rental income (₹8L) already puts them at ₹15 lakh. Review your Indian income annually — not just at tax time.

Before vs. After: What Proper Planning Looks Like

The difference is real money — enough for a nice vacation or an extra SIP contribution.

The Bottom Line

India's new Income Tax Act 2025 doesn't revolutionize NRI taxation overnight, but it makes the 120-day rule and deemed residency permanent fixtures of the tax code. If you're an Indian in Germany with any meaningful income back home, you can no longer afford to wing it.

The good news? The DTAA between India and Germany still protects you from double taxation — if you claim it correctly.

Not sure how the new rules affect your specific situation? Use the TaxDost tax calculator to estimate your German tax refund and see how your Indian income fits into your German filing. Or join our waitlist to get early access to our cross-border filing tools — built specifically for Indians in Germany.

Disclaimer: This article is for informational purposes only and does not constitute legal or tax advice. For personalized guidance on cross-border taxation, please consult a qualified Steuerberater or tax professional.