Summary: Determining the residential status of an individual taxpayer is the first step for calculating income tax liability in India under the Income Tax Act, 1961. Residential status defines tax obligations, classifying individuals into three categories: Resident-Ordinary (ROR), Resident-Not Ordinary (RNOR), and Non-Resident (NR). RORs are taxed on their global income, while RNORs are taxed on global income except for income earned and received outside India. NRs are taxed only on income earned or accrued within India. The residential status is established through a two-step process. First, an individual is considered a “Resident” if they have stayed in India for at least 182 days in the financial year or for at least 60 days in the financial year and 365 days in the past four years. Exceptions apply to Indian citizens leaving for employment or as ship crew. If these conditions aren’t met, the individual is classified as an NR. Second, a Resident is categorized as ROR if they were a resident in at least two of the last ten years and stayed in India for a minimum of 730 days in the preceding seven years. Those not meeting these criteria or earning over ₹15 lakh of Indian income while staying between 120–182 days are classified as RNOR. Deemed residency rules apply to Indian citizens with income over ₹15 lakh. This classification is critical for understanding tax implications for each category.
Why to determine the Residential Status?
When the question arises for payment of Income taxes in India, the very first step is to determine the Residential Status of a person liable to pay Income tax in India. The Indian Income Tax Act, 1961 has different taxability for a Resident and Non-resident person. The Resident is further divided into two categories; Ordinary Resident and Not Ordinary Resident. So, there are three types of Residential Status under Indian Income Tax Law:
1. Resident-Ordinary (ROR)
2. Resident-Not Ordinary (RNOR)
3. Non-resident (NR)
Taxability for each category:
| Category | Income Taxable |
| ROR | Global Income |
| RNOR | Global Income, except Income earned as well as received outside India |
| NR | Income earned or accrued in India |
Steps to determine the Residential Status of an Individual Taxpayer:
Step-1: Determine if person is Resident or Non-Resident:
| Status | Condition |
| Resident | 1. Stay in India in the FY ≥ 182 days
Or 2. Stay in India in the FY ≥ 60 days AND Stay in India in previous 4 FY ≥ 365 days |
| Non-Resident | Does not satisfy both the above conditions |
(Note: Condition # 2 is not applicable for an Indian citizen leaving India as an Indian ship crew or for employment outside India)
Step-2: Determine if a Resident is ROR or RNOR:
| Status | Condition |
| Resident-Ordinary (ROR) | Resident in India ≥ 2 Years out of Previous 10 FY
AND Stay in India in previous 7 FY ≥ 730 days |
| Resident-Not Ordinary (RNOR) | 1. Not Satisfy both the above conditions
or 2. Indian Citizen/ POI having Indian income > Rs. 15 Lakh AND Stay in India in FY ≥ 120 ≤182days or 3. Indian Citizen having Indian income > Rs. 15 Lakh (Deemed resident of India) |
Please find attached flow chart to find the residential status of an Individual.
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