Residential Status of Person under Income Tax
Learn how residential status is determined under the Income-tax Act, 1961 for Resident, Non-Resident, and ROR/RNOR.
How Residential Status is determined as per the Income-tax Act
The residential status of a person, under the Income-tax Act, is one of those important criteria in determining the individual’s taxability.
Now that the tax-filling season is going on for 2023-24, we have curated this article to help you understand residential status and taxability in detail.
Let’s begin!
Who is a Resident in India?
If an individual satisfies any of the below conditions, they are a resident of India.
● They are in India for at least 182 days in a year
OR
● They are in India for at least 60 days during the current financial year and for at least 365 days in the previous four financial years.
Let’s understand this with an example.
Raj spends significant time traveling for work. Let's examine his presence in India over the past few years to determine his residential status for the financial year 2023-2024.
Details:
2023-2024 | Raj was in India for 70 days |
2022-2023 | Raj was in India for 100 days |
2021-2022 | Raj was in India for 90 days |
2020-2021 | Raj was in India for 60 days |
2019-2020 | Raj was in India for 120 days |
● Condition 1: Was Raj in India for at least 182 days during the financial year 2023-2024?
Raj was in India for only 70 days in the financial year 2023-2024. (He does not satisfy this condition.)
● Condition 2: Was Raj in India for at least 60 days during the financial year 2023-2024 and for at least 365 days in the preceding four financial years (2019-2020 to 2022-2023)?
Raj was in India for 70 days in the financial year 2023-2024.
He was in India for a total of 100 + 90 + 60 + 120 = 370 days in the preceding four financial years.
(He satisfies this condition.)
Resident and Ordinarily Resident (ROR) and Resident but Not Ordinarily Resident (RNOR)
A Resident in India is classified as a Resident and Ordinarily Resident (ROR) if they satisfy both the following conditions:
● They have been a Resident of India in at least 2 out of 10 immediate former financial years.
● They have stayed in India for at least 730 days in the 7 immediately previous years.
Who is a Non-Resident in India?
An individual is considered a Non-Resident in India if they do not satisfy any of the conditions for being a Resident. Specifically if they do not meet the criteria of being in India or
● For at least 182 days during the financial year or
● For at least 60 days during the financial year and
● For at least 365 days in the previous four financial years.
Frequently Asked Questions (FAQs)
1. Who is considered an NRI as per the Income Tax Act?
An individual entity is considered a Non-Resident Indian (NRI) if they do not meet either of the following conditions for being a resident in India:
● They are in India for at least 182 days during the financial year.
● They are in India for at least 60 days during the current financial year and for at least 365 days in the previous four financial years.
2. What is the importance of determining the Residential status?
Determining the residential status is vital as it affects the tax liability and applicability of various deductions and exemptions of the individual.
3. Who is a resident of India as per the IT Act?
An individual is considered a resident of India if they meet any one of the following conditions:
● They are in India for at least 182 days in a financial year OR
● They are in India for at least 60 days during the current financial year and for at least 365 days in the previous four financial years.
4. Who is a deemed resident?
An Indian citizen whose income exceeds ₹15 lakh during the financial year (other than income from foreign sources) is considered a deemed resident. They are not liable to tax in any other country or territory by reason of their domicile or residence.
5. How Resident and Ordinarily Resident (ROR) and Resident but not- Ordinarily Resident (RNOR) are different?
A resident individual can be classified as either a Resident and Ordinarily Resident (ROR) or a Resident but not Ordinarily Resident (RNOR) based on the following simple conditions:
● The individual must have been a resident of India for at least 2 out of the last 10 years.
● The individual must have stayed in India for at least 730 days during the last 7 years.
If an individual meets both of these conditions, they will be a Resident and Ordinarily Resident (ROR). On the other hand, If they do not meet one or both of these conditions, they will be a Resident but not an Ordinarily Resident (RNOR).
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