residential status determination
Residential Status for Tax Purposes in India
Residential status is determined for every individual during the financial year (1 Apr-31 Mar). It determines whether the income is taxable in India or not.
Categories of Residential Status
There are three categories of residential status for individuals:
- Resident and Ordinarily Resident (ROR)
- Resident but Not Ordinarily Resident (RNOR)
- Non-Resident (NR/NRI)
Here is how your status is determined.
Are you a resident?
You are a resident if you satisfy one of the following conditions:
| Condition | Requirement |
|---|---|
| Condition 1 | Present in India for >= 182 days during the Financial Year |
| Condition 2 | Present in India for >=60 days during the Financial Year and >=365 days in the preceding 4 financial years |
Exceptions: The 60-day rule is relaxed to the 182-day rule in the following cases:
- An Indian citizen leaving for employment abroad
- An Indian citizen leaving India as a crew member of an Indian ship
- An Indian citizen or person of Indian origin whose income sources from India exceed Rs. 15 lakh.
If neither of these conditions are met, you automatically become a non-resident.
Resident: Ordinary or Non-Ordinary?
A Resident must check two additional conditions to determine whether they are an Ordinary Resident (ROR) or not (NROR)
| Additional Condition | Requirement |
|---|---|
| AC1 | Been a Resident in India in at least 2 of the 10 past Financial Years |
| AC2 | Been Present in India for >=730 days in the last 7 Financial Years |
ROR: Both of these additional conditions satisfied
RNOR: One or neither conditions satisfied
Tax Implications by Status
| Status | Indian Income | Foreign Income | |
|---|---|---|---|
| ROR | Taxable | Taxable | |
| NROR | Taxable | Generally not taxable. Except business income from India or income set up a profession in India | |
| NRI | Taxable | Not Taxable |
For Companies and Other Entities
- A company is a resident if it is incorporated in India or its Place of Effective Management (POEM) is in India during the year.
- Hindu Undivided Families, firms and Associations of Persons are Residents unless control is effectively outside India
Additional Things to Keep in Mind
- Resident status change year by year. It changes annually.
- It is advisable to maintain travel records to prove your status.
- Days of departure and arrival are counted as days in India.
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