Determining Residential Status for Individuals
Residential Status of an individual is of utmost importance since it determines the scope of taxable income under Indian Income Tax Act, 1961 (“the Act”). There are following three types of Residential Status in India:
1. Resident and Ordinarily Resident in India (“ROR”)
2. Resident but Not Ordinarily Resident in India (“RNOR”)
3. Non-Resident in India (“NR”)
The above residential status is determined primarily by number of days’ stay of an individual in India during a financial year (i.e. 1st April – 31st March) along with other prescribed conditions which are discussed in this note. Residential status is determined for each financial year separately.
This article seeks to highlight the residential status and the scope of taxable income and also provides a simplified flow chart to determine residential status.
An individual is said to be a Resident in India for a financial year if he satisfies any of the following two basic conditions:
Once an individual becomes a Resident on satisfying any of the above basic conditions, he shall be further classified into ROR or RNOR, depending on satisfaction of additional conditions. An Individual shall be classified as RNOR if he satisfies any of the following conditions, else he shall be regarded as ROR.
DEEMED INDIAN Tax RESIDENT
rELAXATIONS IN determining residential status
A. For Indian Citizens leaving India
B. For Indian Citizen / Person of Indian Origin coming on visit to India
1. Stay in India ≥ 182 days in a financial year or
2. Stay in India ≥ 120 days in a financial year and ≥ 365 days in preceding four financial years and Indian Income exceeds INR 15 lakhs in the financial year
The day of entry into India and the day of exit from India both shall be considered as stay in India, even if it is for a part of the day.
implications of residential status on scope of income
Once the residential status is determined, the scope of total taxable income of an individual can be broadly laid down as under:
Thus, it is important to correctly determine residential status in order to ascertain scope of taxable income in India.
FLOWCHART FOR DETERMINING RESIDENTIAL STATUS of individuals
The complex conditions and its application have been simplified and provided in the form of a Flowchart below:
 Indian Income refers to income which is received/accrued in India or deemed to be received/accrued in India. For the purpose of this condition, foreign income derived from business controlled in or profession set up in India shall also be considered for the threshold limit.
 Person of Indian Origin is a person who himself or any of his parents or any of his grandparents was born in undivided India.
*Indian Income means any income accrued / received or deemed to be accrued / received in India.
**In addition to taxation of global income, individual also has to give disclosure for all Foreign Assets and Incomes failing which, there can penal consequences under Black Money Act.