Determining the residential location of the taxpayer is equally important for the tax department as verifying other documents. But why? Well, it is already known that the earnings of the registered taxpayer from any source present (property or business) in India are taxable under the law. Another major factor that determines the tax liability of an assessee is his residential status in the country during the financial year.
As per experts, the residential status of the taxpayer means the number of days he was physically present in the country during a financial year and the preceding ten financial years. A Non-Resident/Resident but not ordinarily resident taxpayer has tax liability only on India-sourced income/income received in India whereas a Resident and Ordinarily Resident is taxable on worldwide income.
Categories of Taxpayer’s Residential Status:
The government has made segments to classify the residential status of the taxpayers in India to put them under categories of various taxable income. Look under which category you are.
| Basic Needs for Resident | |
|---|---|
| a) | The cumulative duration of your stay in India during the relevant financial year is at least 182 days |
| b) | The previous year you spent 60 days or more in India and in the 4 years immediately prior to the previous year you spent 365 days or more in India. |
| c) | A citizen of India who leaves India for employment outside India in the previous year as a member of the crew of an Indian ship or for the purposes of working abroad. During the preceding year, he or she spent at least 182 days in India and at least 365 days during the preceding four years. |
| d) | An Indian citizen or person of Indian origin who has visited India in the past year for at least 182 days and 365 days within the last four years and is a citizen of India; b) 120 days or more during the previous year and 365 days or more within the preceding 4 years if the total income other than income from foreign sources is over Rs 15 lakh. |
| Requirements for Residents, but Not for Ordinary Residents | |
|---|---|
| a) | During the last nine years, you have been a non-resident of India. |
| b) | It has been at least 729 days since your last visit to India. |
| c) | It is necessary that you are a citizen of India or a person of Indian origin outside of India who comes to India on a visit, and your total income other than income from foreign sources is greater than Rs 15 lakh and you have been in India for a period or periods totalling 120 days or more, but no more than 182 days in the previous year. |
| d) | A citizen of India who is not a resident of India under section (1) but is deemed to be a resident of India under section (1A) has a total income of Rs 15 lakh over the previous year other than income from foreign sources and is not liable for tax in any other country or territory because of your domicile or residence. |
Read Also: Tax Benefit on Home Loan Interest & Principle
Resident and Ordinarily Resident (ROR)
Taxpayers are considered Residents and Ordinarily Residents if they meet one of two criteria:
- The total no. of days he stayed in India during the relevant financial year is 182 days or more.
- The total number of days he stayed in India during the current financial year is 60 days or more.
- If the total no. of days he stayed in India collectively for the past 4 financial years is 365 days.
For individuals with a total income of more than Rs 15 lakh other than from foreign sources, the period will be reduced to 120 days or more new amendment as of the financial year 2020-21.
Read Also: Easy Explanation on TDS for Property Sale by NRI
Resident but Not Ordinarily Resident (RNOR)
If the taxpayer meets both conditions, he is considered an ordinary resident:-
- Taxpayers’ collective stay in India should be 730 days or more for 7 consecutive financial years preceding the current financial year.
- If he has been an Indian resident for at least 2 years from 10 previous financial years preceding the current financial year.
Therefore, if any individual fails to satisfy even one of the above conditions, he would be an RNOR.
Non-Resident (NR)
An individual satisfying neither of the conditions stated in (a) or (b) above would be an NR for the year.
