Test of Residency for Individuals under Income Tax – A quick recap
Basic Condition to be fulfilled:
Under Section 6(1) of the Income-tax Act, an individual is said to be resident in India in any previous year if he:
(a) is in India in the previous year for a period or periods amounting in all to 182 days or more; or,
(b) has been in India for at least three hundred and sixty-five days (365 days) during the four years preceding the previous year and has been in India for at least 60 days during the previous year.
Exception to the basic condition:
In the case of following individual –
- being a citizen of India, who leaves India in any previous year as a member of the crew of an Indian ship as defined in clause (18) of section 3 of the Merchant Shipping Act, 1958 (44 of 1958), or for the purposes of employment outside India,
- being a citizen of India, or a person of Indian origin within the meaning of Explanation to clause (e) of section 115C, who, being outside India, comes on a visit to India in any previous year,
The provisions of the second condition shall apply in relation to that year as if for the words “sixty days (60 days)”, occurring therein, the words “182 days” had been substituted. However, for the purpose of clause (b) as mentioned above, in case of the citizen or person of Indian origin having total income, other than the income from foreign sources, exceeding fifteen lakh rupees during the previous year, for the words “60 days” occurring therein, the words “120” had been substituted. [Amendment vide Finance Act, 2020].
Non Resident- If an individual does not satisfy any of the above basic condition then, he will be treated as Non-Resident. But the fulfilment of any one of the above conditions (a) or (b) as applicable will make an individual resident in India for tax purposes.
Resident and Ordinarily Resident (ROR)-
An individual may become a resident and ordinarily resident in India if he satisfies both the following conditions given u/s 6(1) besides satisfying any one of the above-mentioned conditions:
(i) he is a resident in at least any two out of the ten previous years immediately preceding the relevant previous year, and
(ii) he has been in India for 730 days or more during the seven previous years immediately preceding the relevant previous year.
Resident but not Ordinarily Resident (RNOR)-
An individual is not ordinarily resident in any previous year if –
(a) he has been a non-resident in India in nine out of the ten previous years preceding that year, or
(b) he has during the seven previous years preceding that year been in India for a period of, or periods amounting in all to, 729 days or less.
(c) a citizen of India, or a person of Indian origin, having total income, other than the income from foreign sources, exceeding fifteen lakh rupees during the previous year, who has been in India for a period or periods amounting in all to 120 days or more but less than 182 days or more; or
(d) a citizen of India who is deemed to be resident in India under clause (1A)
Steps to solve residential status of an Individual-
Step 1 : Determine whether the individual falls under exception to basic condition;
Step 2 : If yes, apply only first basic condition, if satisfied, then he will be resident otherwise non-resident. If no, then apply both basic conditions and Individual becomes Resident on satisfaction of any one of the conditions.
Step 3 : Check if satisfy the test of Ordinarily Residents , if yes, then he will be called ROR, otherwise he will be called RNOR.
Attached Conditions-
Condition 1:
If individual is in India in the previous year for a total period of 182 days or more.
Condition 2:
If he has been in India for at least 365 days during the 4 years preceding the previous year and has been in India for at least 60 days during the previous year. However, this 60 days shall be read as 182 days, if he is a:
– Citizen of India, who leaves India in any previous year as a member of the crew of an Indian ship, or for the purpose of employment outside India or
– Citizen of India or of Indian origin engaged outside India (whether for rendering service outside or not) and who comes on a visit to India in the any previous year.
Condition 3:
– An individual who has been a non-resident in India in at least nine out of the ten previous years preceding that year, and has during the seven previous years preceding that year been in India for a period of, or periods amounting in all to 729 days or less.
– A citizen of India, or a person of Indian origin, having total income, other than the income from foreign sources, exceeding fifteen lakh rupees during the previous year, who has been in India for a period or periods amounting in all to 120 days or more but less than 182 days; or [Amendment vide Finance Act, 2020] Or
– An individual, being a citizen of India, having total income, other than the income from foreign sources, exceeding fifteen lakh rupees during the previous year shall be deemed to be resident in India in that previous year, if he is not liable to tax in any other country or territory by reason of his domicile or residence or any other criteria of similar nature. [Amendment vide Finance Act, 2020].
Note: Above-mentioned provisions are Ad Verbatim as per the same provided under the Income Tax Act, 1961
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