Residential Status
  • Residential Status Under Income-tax Act,1961
  • Residential Status, Person of Indian Origin and Overseas Citizen of India

The residential status (RS) of a person in India depends generally on his period of stay in India. The period of stay is counted in number of days for each financial year beginning from 1st April to 31st March (known as previous year under the Income-tax Act, 1961). It is pertinent to note that the day of departure from India and the day of arrival in India shall also be considered as a day of stay in India. The definition is explained in simple terms below:


·        NON-RESIDENT

An individual who satisfies understated both the conditions of clause (1) of Section 6 of the Income-tax Act, 1961 (the “Act”) then he shall be considered as a Non-Resident as per the Act:


Condition

 

Status

1. He is not in India for 182 days or more during the relevant previous year.

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If yes, then he is a non-resident.

(Subject to condition “2”.)

2. He is not in India for 60 days or more during the previous year and he is not in India for 365 days or more during the 4 years prior to the previous year.

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If yes, then he is a non-resident.

(Subject to exceptions mentioned below)

  *However, the condition of stay of 60 days is extended as below for the following individuals:


Particulars

Extended to

a. Member of the crew of an Indian Ship leaving India

b. Indian citizen leaving India for the purpose of employment

c.  PIO or Citizen of India, being outside India, having come on a visit to India and having total income of less than Rs. 15 lakhs during the said FY (other than the income from foreign sources)**

182 days

PIO or Citizen of India, being outside India, having come on a visit to India and having total income 

of more than Rs. 15 lakhs (other than the income from foreign sources) during the said FY

120 days**

  ** As per recent amendments vide Finance Act, 2020


·        DEEMED RESIDENT:

Over the years, some individuals especially HNIs would arrange their affairs in such a manner that they would qualify as Non-resident in India as well as overseas and consequently, escaped paying taxes in both India and overseas or paid lower taxes in certain jurisdiction. In order to curb such circumstances, concept of deemed residency was introduced vide Finance Act 2020.

An individual is deemed to be “Resident” in India in the relevant previous year, irrespective of number of days of stay in India, if the following conditions are satisfied:

a.    Individual is Citizen of India;

and

b.    has total income exceeding Rs. 15 lakhs (other than income from the foreign sources) in India during the previous year;

and

c.    who is not liable to tax in any other country or territory by reason on his domicile or residence or any other criteria of similar nature.

Such individuals shall be ‘deemed residents’ and shall be considered as “RNOR” (explained in below paragraphs).

However, the above provision of deemed residency shall not apply to the following cases:

-         An individual, who is already said to be resident in India under clause (1) of Section 6 of the Act (explained in below paragraphs)

-         Individuals who are bonafide workers in other countries including Middle East, and who are not liable to tax in the said countries (As per CBDT press Release dated February 2, 2020).

Accordingly, an Indian Citizen working in UAE will not be considered as deemed to be ‘Resident’ in India, since he/she is a bonafide worker in UAE. In order to bring more clarity, an amendment was subsequently introduced in the statute in lines with the CBDT Press Release and the expression “liable to tax” was defined in the Act. 


·        RESIDENT:

In a case where any one of the above two conditions, as explained under clause (1) of Section 6 are not satisfied (refer above table), the person shall be treated as a “Resident in India”.

Resident is further classified into two categories:

1)   RESIDENT BUT NOT ORDINARILY RESIDENT (RNOR)

2)   RESIDENT AND ORDINARILY RESIDENT (ROR)


1)   RESIDENT BUT NOT ORDINARILY RESIDENT (RNOR):

     A person is given a special status of RESIDENT BUT NOT ORDINARILY RESIDENT (RNOR) if he satisfies one of the following conditions:

Condition

 

Status

1. He is non-resident, as per the above provisions, for at least 9 out of 10 previous years prior to the previous year under consideration.

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If yes, he is RNOR

2.His stay in India during the 7 previous year prior to the previous year under consideration should be 729 days or less

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If yes, he is RNOR

3. He is a citizen of India or PIO and comes to India for visit, having total income of more than Rs. 15 lakhs during the previous year (other than income from foreign sources) and his stay in India in the previous year is 120 days or more but less than 182 days

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If yes, he is RNOR

4. He is a citizen of India who is deemed to be resident in India (Deemed Resident as explained above)

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If yes, he is RNOR
 


2)   If an Individual does not satisfy all of the above conditions, then he will be considered as RESIDENT AND ORDINARILY RESIDENT (ROR) and may be subject to tax on his/her global income.


IMPORTANT NOTES:

1.    Generally, a person who is returning to India after 9 years of stay outside India (and who was non-resident for each of the 9 years under the Act), may remain RNOR for the period of minimum two years

2.    The calculation of Rs. 15 lakhs income is important for determination of RS. However, there is no complete clarity on what is included in income other than foreign source and how to compute such income. It has to be decided on case-to-case basis under professional advice.

3.  RS of a person is very important as taxability of income in India is based on individual’s RS.

 

- Updated 01/2023