Determination of Residential status of Foreign Citizen in India as per Income Tax Act

Determination of Residential status of Foreign Citizen in India as per Income Tax Act

Step 1: First of all we have to identify whether the person is Resident Indian or Non- Resident Indian:

An individual shall be treated as Resident in India if he satisfies any one of the below mentioned conditions:

a) If, he/she stays in India for a period of 182 days or more during the previous financial year or

b) If he/she has stayed in India for a period of 60 days or more during the previous financial year and for a period of 365 days or more in 4 financial years immediately preceding the relevant previous financial year.

Note: Condition (b) as mentioned above would not be applicable to an Individual who leaves India for employment purposes (including any kind of self-employment) during an Financial Year or has left India to be a part of the crew of an Indian ship, but comes to India only for visiting purposes.

Step 2: Determination of ROR and RNOR Status

After determining the status of an Individual as Resident or Non- Resident, the next step is to identify whether that Individual is Ordinarily Resident (ROR) or Non- Ordinarily Resident (RNOR).

Resident Individual will be classified as ROR if he/she satisfies both the below mentioned conditions simultaneously:

a) The individual should have been classified as a Resident for at least 2 years out of the preceding 10 previous years and

b) The individual’s stay in India has not been less than an aggregate of 730 days in 7 preceding previous years.

If the resident individual fails to fulfil any one of the above-mentioned condition then he/she will be classified as RNOR.

Determination of Residential status of Foreign Citizen in India as per Companies Act, 2013:

As per section 149(3) of the Companies Act, 2013 there is a requirement of Resident Director in India.

It says that every Company should have at least one Director who stays in India for a period of not less than 182 days in the financial year.

Further, for newly incorporated companies, the requirement of 182 days shall apply proportionately at the end of financial year in which the company is incorporated.