How to derive Residential Status of an individual – section 6 of income tax act

Residential status of an individual decides whether the person is taxable or not in our country. You need to determine residential status of each year to know whether you are taxable in that year or not.

To determine residential status you need to first find out whether you are a resident or non resident. If you are a resident then in the next step you need to determine whether you are a resident but ordinarily resident (ROR) or resident but not ordinarily resident (RNOR). As per the provisions of income tax act residential status an individual can be divided into followings;

1. Resident
2. Non Resident

Conditions to be satisfied

Condition 1

• Your stay in India is 182 days or more during the financial year
• Your stay in India is 60 days or more during the financial year and 365 days or more during the last 4 year proceeding the financial year.

Condition 2

• Resident in India for at least 2 years out of 10 years preceding the financial year for which you are determining the status.
• Stay in India is 730 days or more in 7 years preceding the financial year for which you are determining the status. 

Resident

Any person satisfying any one of the conditions as mentioned in “condition 1” will be treated as a resident. Now resident again divided into two categories;

• Resident but Ordinarily resident (ROR)
• Resident but Not Ordinarily resident (RNOR)

After deciding as a resident you need to know whether you are a ROR or RNOR.

If you satisfy any one conditions of “condition 1” and also satisfy both the conditions of “condition 2“ then you will be treated as “ROR”.

If you satisfy any one conditions of “condition 1” and satisfy one or none from “conditions 2” then you will be treated as “RNOR”.

Non Resident

If you are not satisfying any of the conditions listed above then you will be treated as “non resident”.

Exceptions to the above conditions

In following situations the second point of “condition 1” as mentioned above will be changed;

• A person leaves Indian for employment.
• A person leaves India as a crew of Indian ship.
• A person of Indian origin comes to India for a visit (a person will be treated as from Indian origin if such person or either of his parents or his grandparents was born in undivided India.).

As discussed above, conditions mentioned in “condition 1” will be changed to following conditions;

• Your stay in India is 182 days or more during the financial year
• Your stay in India is 182 days or more during the financial year and 365 days or more during the last 4 year proceeding the financial year.

Other Relevant points

• Day of leaving India and the day of arriving in India will be considered for residential status determination i.e. when you calculate 182 or 60 days in above calculation you need to add both days to it.
• For ROR, all incomes whether received in India or outside Indian will be taxable. Any income that generated out of India and received outside will be taxable in India.
• In the case of RNOR any income accrued or arises in India will be taxable in India. Income that accrued or arises outside India will not be taxable in India. If you have received salary generated out of India then the entire income will be taxed in India whether you are in India or outside India.
• In case of RNOR, any income arises out of a business controlled in India or professional setup in India then such income will be charged to income tax in India.
• Stay in India includes stay in the territorial water of India i.e. 12 nautical miles in to the sea from the Indian coastal line.
• The above stay as mentioned above is not a regular stay. If you are visiting frequently to India then all the days stayed in Indian including days of arriving and departure will be added to calculate this limit.

FAQ on Residential status of individual