Summary: The residential status of an assessee under the Income-tax Act plays a crucial role in determining the extent of their tax liability in India. Individuals can be classified as residents or non-residents, with further distinctions for residents being either “ordinarily resident” or “not ordinarily resident.” A person’s residential status depends on the duration of their stay in India during the relevant financial year and, in some cases, over the preceding years. Indian citizens and persons of Indian origin with different income levels are subject to specific rules regarding their stay in India, affecting their classification as residents. For instance, those earning more than ₹15 lakhs and staying in India for 120 to 182 days may be deemed “not ordinarily resident” if they meet certain conditions. Additionally, entities like Hindu Undivided Families (HUFs), companies, and firms are classified based on the location of their control and management. Indian companies are always considered residents, while foreign companies are classified based on their Place of Effective Management (POEM). The classification of residential status is pivotal in deciding what portion of an assessee’s income is taxable in India, making it a fundamental aspect of tax planning and compliance.
An assessee can be categorized as a resident in India or a non-resident in India during the previous year. Further, if the assessee is an individual or a HUF and he is resident in India, his residential status is further sub-classified as a resident and ordinarily resident or resident but not ordinarily resident.
Residence in India for the purpose of the Income-tax Act
The income-tax liability of an assessee is calculated on basis of his total Income. What is to be included in total income of assessee is greatly influenced by his residential status in India.
An assessee can be categorized as a resident in India or a non-resident in India during the previous year. Further, if the assessee is an individual or a HUF and he is resident in India, his residential status is further sub-classified as a resident and ordinarily resident or resident but not ordinarily resident.
The residential status of a person is categorised into the following categories:
| Individual | When treated as a resident? | When treated as a resident but not ordinarily resident? |
| Indian Citizen visiting India having income* < Rs. 15 lakhs | If his period of stay in India during the current year is 182 days or more |
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| Indian Citizen visiting India having income*> Rs. 15 lakhs | If his period of stay in India during the current year is 182 days or more |
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| If the period of stay in India is 120 days or more but less than 182 days in current year and 365 days or more in last 4 years | Always deemed to bea not-ordinary resident | |
| If such individual is not liable to tax in any other country due to his domicile or residence or any other criteria of similar nature | Always deemed to be a not-ordinary resident | |
| Person of Indian Origin visiting India having income*< Rs. 15 lakhs | If his period of stay in India during the current year is 182 days or more |
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| Person of Indian Origin visiting India having income*> Rs. 15 lakhs | (a) If his period of stay in India during the current year is 182 days or more |
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| (b) If the period of stay in India is 120 days or more but less than 182 days in current year and 365 days or more in last 4 years | Always deemed to be a not-ordinary resident | |
| Indian Citizen, having Income*< Rs. 15 lakhs, leaving India:
(a) As a member of the crew of an Indian ship; or (b) For the purposes of employment outside India. |
If his period of stay in India during the current year is 182 days or more | If the period of stay in India is 729 days or less in past 7 years; or such individual is a non-resident in 9 out of 10 preceding years. |
| Indian Citizen, having income* > 15 lakhs, leaving India:
(a) As a member of the crew of an Indian ship; or (b) For the purposes of employment outside India. |
If his period of stay in India during the current year is 182 days or more |
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| If such individual is not liable to tax in any other country due to his domicile or residence or any other criteria of similar nature | Always deemed as not-ordinary resident | |
| Any other Individual | (a) If his period of stay in India during the current year is 182 days or more; or
(b) If his period of stay in India is 60 days or more but less than 182 days in the current year and 365 days or more in the last 4 years. |
If the period of stay in India is 729 days or less in past 7 years; or such individual is a non-resident in 9 out of 10 preceding years.
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| Note 1: An individual is considered as a non-resident in India if any of the conditions required to be fulfilled to become a resident are not satisfied.
Note 2: Any other Indian citizen (not covered above) having Income*more than Rs. 15 lakhs shall be deemed as a resident, if he is not liable to tax in any other country due to his domicile or residence or any other criteria of similar nature. *Income means total income, other than the income from foreign sources. |
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| Person other than an Individual | Resident | Non-Resident |
| HUF | If control and management of HUF are in India.
A resident HUF is further classified into ‘Resident but not Ordinarily Resident’ if: a) The period of stay of Karta in India is 729 days or less in last 7 years; or b) Karta is ‘non-resident’ in 9 out of 10 preceding years. |
If control and management of HUF is situated wholly outside India |
| Indian Co. | Always treated as a resident in India | – |
| Foreign Co. | If the Place of Effective Management (POEM) of Foreign Co. is in India | If the Place of Effective Management (POEM) of Foreign Co. is outside India |
| Firm/Association of Persons (AOP)/ Body of Individuals (BOI) etc. | If control and management of the assessee is situated in India | If control and management of the assessee is situated wholly outside India |
[As amended by Finance Act, 2024]
