Determination of “Residential Status” under Income Tax Act, 1961 (Section 6)

1. Importance of Residential Status

Residential status determines:

• Which incomes are taxable in India (Indian vs. foreign income)
• Applicable tax rates and compliance requirements
• Eligibility for certain deductions/exemptions

2. Categories of Residential Status

There are 3 categories:

1. Resident and Ordinarily Resident (ROR)
2. Resident but Not Ordinarily Resident (RNOR)
3. Non-Resident (NR)

3. Basic Conditions for Resident (Section 6(1))

An individual is Resident in India if they satisfy either of:

1. 182-Day Rule: Present in India for ≥182 days in the financial year (April-March), OR
2. 60-Day + 365-Day Rule:

• Present in India for ≥60 days in current FY AND
• ≥365 days in preceding 4 financial years

Exception for Indian citizens/POI visiting India:

• 60 days becomes 120 daysif total income (excluding foreign income) > ₹15 lakh
• For Indian citizens working abroad/leaving India for employment: 60 days becomes 182 days

4. Ordinarily Resident (ROR) Conditions

A Resident must satisfy both:

1. 2-Year Residency: Resident in India for ≥2 out of 10 previous years AND
2. 730-Day Presence: Present in India for ≥730 days in preceding 7 years

Fail either condition → RNOR

5. Not Ordinarily Resident (RNOR)

Applies if:

1. New Resident: First time becoming resident (didn’t meet 2-year condition), OR
2. Long-term NR: Was NR in 9 out of 10 previous years, OR
3. Short Stay: Present in India for ≤729 days in preceding 7 years

6. Non-Resident (NR)

Fails both basic resident conditions:

• In India for <182 days (general) or <60/120 days (special cases) AND
• Doesn’t meet 365-day condition for preceding 4 years

7. Residential Status for Other Entities

8. Practical Examples

1. ROR Case:

• A was in India for 190 days in FY 2023-24
• Also resident for 3 of last 10 years
• Present for 800 days in last 7 years
  → ROR

2. RNOR Case:

• B (NRI returning) in India for 200 days in FY 2023-24
• Was NR for last 8 years
  → RNOR

3. NR Case:

• C (foreign employee) in India for 150 days
  → NR

9. Consequences of Status

10. Special Considerations

• Double Taxation Relief: Available under DTAA for foreign income
• POEM (Place of Effective Management): Critical for company residency
• Leaving India Cases: Different day-count rules apply

Tip: Maintain travel records (passport stamps, tickets) to prove residency status.