Residential Status
  • Residential Status – Income Tax Act
  • Residential Status – FEMA

When is an individual considered as a Resident in India under the Act?

Ans. An individual is considered as a Resident in India under the Act if :-

1. he stays in India for 182 days or more in a FY; or
2. he is India for 60* days or more in a FY and for 365 days or more in preceding 4 FYs.

*However, the condition of stay of 60 days is extended to 182 days for:

1. Member of the crew of an Indian Ship leaving India
2. Indian citizen leaving for purpose of employment
3. PIO or Citizen of India, being outside India, having come on a visit to India

When is an individual considered as a Non-resident (NR) in India under the Act?

Ans. If an individual does not satisfy any of the conditions for being a Resident in India as per prior question, he/she shall be considered as a Non-resident in India.

When is an individual considered as a RNOR in India under the Act?

Ans.
If an individual is a Resident of India for a particular FY (as explained in the above question), 
AND
if the said individual is –
1. a Non-resident in India in 9 FY out of 10 preceding FY; or
2. is in India for less than 729 days in preceding 7 FY,

then he/she shall be considered as a RNOR in India and shall be eligible for exemption for taxation in India in respect of specified income earned outside India.

However, if the aforesaid additional conditions are not satisfied, then he/she shall be considered as ROR in India.


Whether date of arrival in India and date of departure from India to foreign country must be included while calculating number of days of stay in India?

Ans. Generally, while calculating the number of days of stay in India, date of arrival and date of departure in India shall be treated as days of stay in India. Normally, dates stamped on Passport are considered as proof of departure from and arrival in India.

However, in case where an individual is a Citizen of India and a member of the crew of a Indian Ship, on a voyage having originated from any port in India, with destination being any port outside India or vice versa, then number of days of stay in India for the said individual, shall not include the period beginning on the date entered into the Continuous Discharge Certificate (CDC) in respect of joining the ship till date entered into the CDC in respect of signing off from the ship.

An Indian citizen leaves India for the first time on July 1, 2018 for taking up employment abroad. He/she does not return to India till March 31, 2019. What will be his/her residential status for the FY 2018-19?

Ans. The individual in the aforesaid case stays in India for 92 days during FY 2018-19.

As per provisions of the Act, in the following cases, only the condition of stay in India for less than 182 days is applicable for determining Residential Status to be NR:

1. In case of a person, who is citizen of India or PIO being outside India, who is on visit to India;
OR
2. In case of a person, who is citizen of India, and leaves India for employment outside India or as a member of the crew of an Indian ship.

Accordingly, as his/her stay in India is 92 days which is less than 182 days, the residential status shall be a NR for the FY 2018-19 under the provisions of the Act.

It may be noted that the same conditions may not be applicable in case of family members of the person leaving India who has left India for the purpose of employment abroad.

Would the answer in the above example be different in case he/she was not an Indian citizen but a PIO?

Ans. As explained above, he/she is not an Indian citizen, so he/she would not be eligible to claim benefit of 182 days, even though he/she is a PIO. Hence, as his/her stay in India in the FY 2018-19 exceeded 60 days and for the 4 years preceding the FY 2018-19 exceeded 365 days, his/her residential status would be Resident of India.

A foreign citizen who is a PIO is settled overseas since 2004. She/he comes on a visit to India in the FY 2018-19 on June 1, 2018 and leaves India on February 1, 2019. For the past 13 years, her/his days of stay in India were less than 180 days per year, however her/his total stay for the last 7 years in India was around 1000 days. What will be her/his residential status for the FY 2018-19?

Ans. The individual in the aforesaid case stays in India for 246 days during FY 2018-19.

So, she/he shall be a Resident for the FY 2018-19, as her/his stay in India for the FY 2018-19 is more than 182 days. However, she/he shall not be ROR despite her/his stay for the past seven years is exceeding 729 days, as she/he has been a NR for all the past ten years by virtue of her/his stay in India being less than 182 days for the past ten years. Accordingly, her/his residential status for the FY 2018-19 shall be that of a RNOR.

Who is treated as a PIO as per the Act?

Ans. A person shall be deemed to be of Indian origin if he/she, or either of his/her parents or any of his/her grand-parents, was born in undivided India (i.e., India, Pakistan and Bangladesh before 1947).

During FY 2018-19, an Indian citizen left India for the purposes of employment overseas on August 1, 2018. He/she came on a visit to India on January 20, 2019 and left for the foreign country on February 1, 2019. What shall be his/her total number of days of stay in India?

Ans. His/her stay in India for the FY 2018-19 will be 136 days (April 1, 2018 to August 1, 2018 - 123 days and January 20, 2019 to February 1, 2019 - 13 days). The day of leaving India and returning to India both will be calculated as ‘stay in India’ for the purposes of counting number of days of stay in India.

An Indian citizen is leaving India for the first time for taking-up employment overseas. What is the best time for his/her departure from India?

Ans. As it is his/her first year of leaving India for the purposes of employment, being an Indian citizen, he/she will become a resident in India only if his/her stay in India for the concerned FY is 182 days or more. Hence, he/she should leave India on or before September 28 to have the status of NR for that FY. This is on the basis that he/she does not return to India for any visits personal/ official until the end of tax year.

If he/she fails to do so, he / she will qualify as ROR and by virtue of taxation rules will be taxed on global income for residents, his/her in India subject to DTAA benefits. There will also be an obligation to report foreign assets in India. Thus, he/she may need to plan his/her departure and subsequent visit appropriately keeping in mind the tax provisions.

If an Indian citizen settled overseas wishes to return to India for good, what is the best time for her/him to do so?

Ans. On the basis that he/ she was a NR in the previous years, she/he should try to come back on or after February 1 (or February 2 in case of a leap year). However, if her/his stay in India in prior 4 previous years does not exceed 365 days, then she/he may return after October 2 (or October 3 in case of a leap year). In both the cases, she/he will continue to remain NR for that FY.

A Karta has an HUF comprising of himself, his wife, two sons and an unmarried daughter. The family is based in India, except for the Karta who resides overseas for his employment purposes. He visits India once in four months and takes the financial decision on his stay in India. Will the HUF be categorized as a resident?

Ans. An HUF will be categorized as NR only when it is wholly controlled and managed from outside India. Accordingly, because the HUF will be managed wholly in India, as the decisions are taken when Karta comes India, its residential status shall be resident. Further, the HUF will not be considered ROR if its Karta has been a Resident for less than 2 FY out of 10 FY preceding that FY, or has not during the 7 FY preceding that FY been in India for more than or equal to 730 days. Accordingly, if the Karta is not ROR, the HUF shall not be ROR.

An Indian citizen stays in India for less than 182 days in FY 2018-19 and leaves India for the first time for the purpose of self-employment / business outside India. What will be his/her residential status for the FY 2018-19?

Ans. The expression ‘employment’ may also include business and self-employment.

So, in case of a person, who is citizen of India, and leaves India for self-employment or business outside India, then only the condition of stay in India for less than 182 days may be applicable for Residential Status to be NR.

Accordingly, he/she shall be a NR for the FY 2018-19 under the provisions of the Act, as his/her stay in India is less than 182 days for the said FY.

The same provisions may not apply for the family members accompanying such person.

How to determine residential status of a person under FEMA?

Ans. "Person resident in India" means—

(i) a person residing in India for more than one hundred and eighty-two days during the course of the preceding FY but does not include—

A. a person who has gone out of India or who stays outside India, in either case—
• for or on taking up employment outside India, or
• for carrying on outside India a business or vocation outside India, or
• for any other purpose, in such circumstances as would indicate his intention to stay outside India for an uncertain period;

B. a person who has come to or stays in India, in either case, otherwise than—
• for or on taking up employment in India, or
• for carrying on in India a business or vocation in India, or
• for any other purpose, in such circumstances as would indicate his intention to stay in India for an uncertain period;

Explanation:
a) The residential status of a person leaving India will be determined as under:
If a person leaves India for the purpose of employment, business or for any other purpose that indicates his intention to stay outside India for an uncertain period; then he becomes a person resident outside India from the day he leaves India for such purpose.

b) The residential status of a person returning to India will be determined as under:
If a person comes to India for the purpose of employment, business or for any other purpose that indicates his intention to stay in India for an uncertain period; then he becomes a person resident in India from the day he comes to India for such purpose.

Under FEMA, stay for a period of 182 days is also stated. However, it shall be noted that the residential status of a person in our opinion is primarily determined basis the intention of the person to stay in India.


ii) any person or body corporate registered or incorporated in India,

(iii) an office, branch or agency in India owned or controlled by a person resident outside India,

(iv) an office, branch or agency outside India owned or controlled by a person resident in India.

"Person resident outside India" means a person who is not a resident of India.

Residential status as per FEMA under various scenarios for person leaving India on 1st June 2018:

Ans.

Sr. No.

Purpose

Residential Status – Person resident in India/ Person resident outside India

1.     

Person leaves India for taking up employment or vocation or profession in UK

Person resident outside India from day of leaving for employment.

2.     

Student leaves for California, USA, to undertake a MS course for a period of 3 years.

Person resident outside India as per circular issued by RBI.

3.     

 

 

 

 

A person residing in India for more than 182 days during the course of the preceding FY but who leaves India in current year for the employment or business or otherwise with  intention to settle outside India

Such a person shall be Person resident outside India from the day he leaves India -need to ignore condition of having stayed in India for more than 182 days.

 

4.     

A person leaves India for US as he received Green Card but has no employment or business but he intends to settle or stay there for an uncertain period

Person resident outside India since he has left India for an uncertain period.

 

5.     

Person has taken US citizenship even though his wife and children are in India. He travels to India to meet his family and is in India for more than 250 days.

Person resident outside India as he has no intention to stay in India for uncertain period.

6.     

Person comes to India for family marriage. She fell sick while she was in India and is unable to go back. She stays in India for more than 182 days.

Person resident outside India since she has no employment/business in India; and has employment or business abroad; plus house / office etc. 

7.     

Person a foreign citizen of non-Indian Origin sets up a proprietary concern in India on 1st June 2018 for carrying on business with intention to settle in India.

Person resident in India w.e.f. 1st June 2018 as he came to India for carrying on business and settle in India.

What is the residential status of students from India going abroad for studies?

Ans. It is observed that when students leave India for taking up a course of specified duration, such stay outside India exceeds the period officially intended. While taking up studies, or further advance courses, students may have to take up job or seek scholarship to supplement income to meet their financial requirements abroad. As students have to earn and learn and may even borrow, their stay for educational purposes gets prolonged than what is intended when leaving India.

It is clear that their stay  and intention to stay outside India is for an uncertain period when they go abroad for their studies; they  are treated as  Person resident outside India as per the circular issued by RBI.

Can the residential status of person vary for the same FY as per FEMA and the Act?

Ans. Yes. The residential status of a person for a particular FY may vary as per FEMA and Income Tax i.e. a person may be a “resident” person in India as per the Act and a person resident outside India as per FEMA and vice versa. 

Who is a PIO?

Ans. Person of Indian Origin (PIO) means a person resident outside India who is a citizen of any country other than Bangladesh or Pakistan or such other country as may be specified by the Central Government, satisfying the following conditions:
• Who was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955); or
• Who belonged to a territory that became part of India after the 15th day of August, 1947; or
• Who is a child or a grandchild or a great grandchild of a citizen of India or of a person referred to in clause (a) or (b); or
• Who is a spouse of foreign origin of a citizen of India or spouse of foreign origin of a person referred to in clause (a) or (b) or (c)

However, as per Gazette notification No. 26011/01/2014IC.I published on 09.01.2015 all the existing PIO card holders registered as such under new PIO Card scheme 2002, shall be deemed to be Overseas Citizens of India Cardholder (OCI).

Therefore from 09.01.2015, one can only register as OCI cardholder and existing PIO cardholders may be considered as OCI cardholders.

Who is an OCI?

Ans. The Constitution of India does not allow holding dual citizenship i.e. Indian citizenship and citizenship of a foreign country simultaneously.

However, after repeated demand from persons of Indian origin for allowing dual citizenship, Government in 02.12.2005 started Overseas Citizen of India scheme. However, it is to be noted OCI is not dual citizenship of India. Registration as an OCI provides the registrant few benefits as specified in FAQ. 8 below.

Who are eligible to be OCI holder?

Ans. A foreign national is eligible for registration as OCI holder if one falls under any of the below criteria:

• who was eligible to become a citizen of India on 26.01.1950** or
• was a citizen of India on or at any time after 26.01.1950 or
• belonged to a territory that became part of India after 15.08.1947
• Person of Indian Origin (PIO) card holders are deemed to be OCI

Children and grandchildren including minor children of the above referred persons are also eligible for OCI, provided his/her country of citizenship allows the same in some form or other under local laws, and is eligible for registration as an OCI.

However, if the applicant had ever been a citizen of Pakistan or Bangladesh, he will not be eligible for OCI.

• Spouse of foreign origin of a citizen of India or spouse of foreign origin of an OCI card holder registered and whose marriage has been registered and subsisted for a continuous period of not less than 2 years immediately preceding the presentation of the application.

Provided that for eligibility for registration as OCI, such spouse shall be subjected to prior security clearance from a competent authority in India.

**Any person who, or whose parents or grand-parents were born in India as defined in the Government of India Act, 1935 (as originally enacted), and who was ordinarily residing in any country outside India was eligible to become citizen of India on 26.01.1950. An OCI card holder is eligible to visit India without obtaining a VISA.


What are benefits of becoming an OCI?

Ans. Few major benefits of becoming an OCI are as below:-

• A multiple entry/ multi- purpose life-long visa for visiting India
• Exemption from registration with local police for any length of stay in India
• OCI may be granted Indian citizenship after 5 years from date of registration provided he/she stays in India for 1 year before making application
• Employment allowed in all areas except mountaineering, missionary and research work and other work requiring PAP/RAP (PAP-protected area permit, RAP- Restricted area permit)