What Is Residential Status under the Income Tax Act?

Your residential status is a fundamental factor that determines the scope of income taxable in India. It helps the Income Tax Department decide what income you are liable to pay tax on whether it is earned in India, abroad, or both.

Residential status is governed by Sections 6(1) to 6(6) of the Income Tax Act, 1961 and is assessed for each financial year (April to March), not on a permanent or citizenship basis.

Whether you are an Indian citizen, a Non-Resident Indian (NRI), a foreign national working in India, or someone living abroad temporarily, knowing your residential status is crucial to determining your income tax obligations in India.

Why Does Residential Status Matter?

Your tax liability in India depends on your residential status:

Residential Status	Global Income Taxable in India?	Indian Income Taxable?
Resident and Ordinarily Resident	Yes	Yes
Resident but Not Ordinarily Resident (RNOR)	No (only income from India and controlled from India)	Yes
Non-Resident (NR)	No	Yes

For example, a non-resident is taxed only on income earned or received in India, whereas a resident and ordinarily resident is taxed on global income.

How Is Residential Status Determined?

Section 6 of the Income Tax Act lays down two basic categories:

1. Resident
2. Non-Resident

If you qualify as a resident, you are further classified into:

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

Let’s break down the criteria.

Basic Conditions for Determining Residency (Section 6(1))

An individual is considered a resident in India if they satisfy any one of the following conditions:

1. Stayed in India for 182 days or more during the relevant previous year
   OR
2. Stayed in India for 60 days or more in the relevant previous year and 365 days or more in the 4 immediately preceding years.

Exception for Indian citizens or PIOs (Persons of Indian Origin)

• The 60-day condition is extended to 182 days if the person comes to India on a visit.

Amendment for high-income NRIs (from FY 2020-21):

• For Indian citizens or PIOs earning more than ₹15 lakh from Indian sources, the 182-day condition is reduced to 120 days.

Additional Conditions to Determine ROR or RNOR (Section 6(6))

Once an individual qualifies as a resident, the next step is to determine whether they are ordinarily resident or not ordinarily resident:

You are an Ordinarily Resident (ROR) if:

• You have been resident in India for at least 2 out of 10 previous years, and
• You have stayed in India for at least 730 days in the last 7 years

If either condition is not met, you are a Resident but Not Ordinarily Resident (RNOR).

Residential Status for HUFs, Firms, and Companies

Hindu Undivided Family (HUF)

• A HUF is resident if the control and management of its affairs is wholly or partly situated in India.
• It is Ordinarily Resident if the Karta satisfies the same two conditions as individuals (for ROR).

Firms and AOPs

• Treated as resident if any part of their control and management lies in India during the year.

Companies

• A company is resident in India if:
  • It is incorporated in India, or
  • Its place of effective management (POEM) is in India for that year.

Impact of Residential Status on Taxation

Type of Income	ROR	RNOR	Non-Resident
Indian income	Taxable	Taxable	Taxable
Foreign income (received in India)	Taxable	Taxable	Taxable
Foreign income (earned and received abroad)	Taxable	Not taxable	Not taxable
Capital gains on global assets	Taxable	Not taxable	Not taxable

Common Scenarios That Affect Residential Status

1. Frequent overseas travel for employment or business
2. Returning NRIs settling in India
3. Indian citizens visiting India during holidays
4. Foreign nationals staying in India for assignments
5. Digital nomads or remote workers

Residential Status Calculator Tool

The Income Tax Department provides an official Residential Status Calculator to help determine your status based on stay periods.

However, a professional review is recommended in complex or borderline cases to avoid future tax scrutiny or notices.

FAQs on Residential Status

1. Is residential status the same as citizenship?
   No. Residential status is determined by physical stay in India, not citizenship.
2. Can I be a resident in India and another country in the same year?
   Yes. For Indian taxation, only your stay in India matters. Dual residency may require relief under tax treaties.
3. What happens if I exceed 182 days by mistake?
   You may become a resident and be taxed on global income unless you qualify for RNOR status.
4. What is RNOR status, and how long can I hold it?
   RNOR helps returning NRIs avoid tax on foreign income. You can qualify for RNOR for up to 3 years, depending on your stay history.
5. Does my salary earned abroad get taxed in India if I’m a resident?
   Yes, if you’re classified as ROR. Not taxed if you’re RNOR or non-resident.
6. Are foreign bank accounts taxed in India?
   They must be disclosed by ROR individuals. Tax depends on the source and use of funds.
7. What is POEM in company residency rules?
   Place of Effective Management (POEM) is where key management decisions are made. If it’s in India, the company is treated as a resident.
8. How do I calculate my days of stay in India?
   Include all days (including arrival and departure days) when physically present in India.
9. Can residential status change every year?
   Yes. It is determined separately for each financial year based on your stay and other criteria.
10. How can I avoid being taxed on global income?
    You must ensure your days of stay are below the thresholds and claim NRI or RNOR status correctly.

Need Help Determining Your Residential Status?

Let Tradeviser’s Expert Consultancy Services handle it for you. From accurately calculating your residential status to ensuring correct tax filing based on your global income, we ensure you’re compliant and protected. Contact us today to avoid misclassification, double taxation, or legal notices