1. Introduction
The determination of residential status is a cornerstone of the Indian income-tax framework, as it governs the scope of taxable income. Both the Income-tax Act, 1961 (“ITA, 1961”) and the Income-tax Act, 2025 (“ITA, 2025”) prescribe detailed tests to classify an assessee as a Resident, Resident but Not Ordinarily Resident (RNOR), or Non-Resident (NR). While the 2025 Act introduces structural and terminological changes, the substantive principles largely remain consistent.
2. Residential Status of Individuals – Basic Conditions
2.1 Resident Individual
| Particulars | ITA, 1961 | ITA, 2025 |
|---|---|---|
| Governing provision | Section 6(1) | Section 6(2) |
| Relevant period | Previous Year (PY) | Tax Year (TY) |
An individual shall be treated as a Resident in India if any one of the following conditions is satisfied:
- He is in India for 182 days or more during the PY / TY; or
- He is in India for 60 days or more during the PY / TY and for 365 days or more during the four years immediately preceding the PY / TY.
If neither condition is fulfilled, the individual is treated as a Non-Resident.
3. Classification of Resident Individuals
Once an individual qualifies as a resident, further classification is required under both enactments.
3.1 Resident and Ordinarily Resident (ROR)
| Condition | ITA, 1961 | ITA, 2025 |
|---|---|---|
| Resident in at least 2 out of last 10 years | Section 6 | Section 6 |
| Stay of 729 days or more in last 7 years | Section 6 | Section 6 |
If both conditions are satisfied, the individual is classified as ROR.
3.2 Resident but Not Ordinarily Resident (RNOR / NOR)
If any one of the above conditions is not satisfied, the individual is treated as RNOR.
4. Special Provisions for Indian Citizens
4.1 Member of Crew of an Indian Ship
| Provision | ITA, 1961 | ITA, 2025 |
|---|---|---|
| Special rule | Explanation 1(a) to Section 6(1) | Section 6(3) |
- Only the 182-day condition applies.
- Period between joining and signing off, as recorded in the Continuous Discharge Certificate (CDC), is excluded while computing stay in India.
4.2 Indian Citizen Leaving India for Employment Outside India
| Provision | ITA, 1961 | ITA, 2025 |
|---|---|---|
| Governing rule | Explanation 1(a) to Section 6(1) | Section 6(3)(b) |
- Only the 182-day test is applicable.
- The expression “for the purpose of employment outside India” includes self-employment, i.e., carrying on a business or profession outside India.
5. Indian Citizens / Persons of Indian Origin Visiting India
5.1 Income-Based Day Count Test
| Particulars | ITA, 1961 | ITA, 2025 |
|---|---|---|
| Income threshold | ₹15 lakh | ₹15 lakh |
Where a Citizen of India (COI) or Person of Indian Origin (POI) residing outside India comes on a visit to India:
- If income other than income from foreign sources exceeds ₹15 lakh:
- 120 days replaces the normal 60-day condition, along with the 365-day test.
- If such income is ₹15 lakh or less:
- Only the 182-day condition applies.
Income from foreign sources means income accruing or arising outside India, excluding income from a business or profession controlled or set up in India.
6. Deemed Resident Provisions
6.1 Deemed Resident
| Provision | ITA, 1961 | ITA, 2025 |
|---|---|---|
| Section | 6(1A) | 6(7) |
An individual shall be deemed to be a Resident in India if:
- He is a Citizen of India,
- His income (other than income from foreign sources) exceeds ₹15 lakh, and
- He is not liable to tax in any other country by reason of domicile, residence, or similar criteria.
Such individuals are always classified as RNOR, irrespective of their physical stay in India.
7. Residential Status of Non-Individuals – Judicial Perspective
In Formula One World Championship Ltd. v. CIT (2017) (SC), the Supreme Court held that:
- Continuous and exclusive access to Buddh International Circuit constituted a Fixed Place Permanent Establishment (PE).
- Income attributable to such PE was taxable in India under:
- Section 9(1)(i) of ITA, 1961, and
- Corresponding provisions relating to business connection under the new Act.
- The ruling was delivered in favour of the Revenue.
8. Taxability of Sale of Property by a Non-Resident
8.1 Accrual or Arising of Income
| Provision | ITA, 1961 | ITA, 2025 |
|---|---|---|
| Deemed accrual | Section 9(1)(i) | Corresponding Section 9 |
Income arising from the transfer of a capital asset situated in India is deemed to accrue or arise in India.
8.2 Nature of Capital Gains
-
Classification as Short-Term or Long-Term Capital Gain depends on the period of holding under both enactments.
9. TDS on Sale of Property by Non-Residents
9.1 Obligation to Deduct TDS
| Provision | ITA, 1961 | ITA, 2025 |
|---|---|---|
| TDS obligation | Section 195 | Corresponding TDS provision |
-
The buyer of the property is responsible for deducting TDS on payment to a Non-Resident seller.
9.2 Time and Rate of Deduction
- Deduction at the earlier of credit or payment.
- TDS at rates in force, as defined under:
- Section 2(37A) of ITA, 1961, or
- Applicable rate under the new Act / DTAA.
For Short-Term Capital Gains, TDS is generally at 30% plus surcharge and cess.
10. Lower Deduction of TDS
10.1 Application for Lower TDS
| Provision | ITA, 1961 | ITA, 2025 |
|---|---|---|
| Lower deduction | Section 197 | Corresponding provision |
- Application through Form 13 with supporting documents.
- Upon approval, TDS is deducted at the reduced rate specified.
TAN Requirement
- Mandatory under Section 203A of ITA, 1961 and corresponding provision of ITA, 2025.
11. Conclusion
Both the Income-tax Act, 1961 and the Income-tax Act, 2025 emphasize that residential status is the gateway to taxation. While the 2025 Act modernises structure and terminology, the core residency tests, deemed resident rules, and taxability principles remain aligned. Accurate determination of residential status is therefore critical for global income taxation, capital gains, and withholding tax compliance under Indian tax law.
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