Residential Status - Am I Resident Or Non-Resident(NRI) in India?

What is Residential Status in India?

Residential status in India is important for determining how you are taxed. The Income Tax Act defines three residential statuses:

• Resident and Ordinarily Resident (ROR): This is the most common category. You are considered a resident of India for tax purposes if you meet either of the following conditions:
  • You are physically present in India for at least 182 days in a financial year. (This is known as the 182-day rule.)
  • You have been present for at least 60 days in the current financial year, and you were also present in India for a total of 365 days or more in the four preceding financial years. (This is known as the 60-day rule.)
• Resident but Not Ordinarily Resident (RNOR): An ordinarily resident individual is someone who has close connections with India. This can be based on factors like your nationality, place of birth, or permanent residence. However, under the Income Tax Act, an individual is considered ordinarily resident if they meet either of the following conditions:
  • They have spent 730 days or more in India in the seven years preceding the current year.
  • They have resided in India for at least two of the ten preceding financial years before the current year.
• Non-Resident (NRI): If you don't meet the criteria for resident or ordinarily resident, you are considered a non-resident for tax purposes.

When Does a Person Become a Resident in India?

Upon fulfilling any one of the following two conditions (known as basic conditions), you are said to be a resident in India for the concerned Financial Year (1 April-31 March of next year). These conditions are:

1. You have stayed in India for 182 days or more during the relevant financial year; Or
2. You have stayed for 60 days or more during the financial year and a total of 365 days or more during 4 years immediately prior to that financial year.

Example to Explain Residential Status in India:-

i) Mr. Bill Gates stayed in India from 01st April 2017 to 31st July 2017 and again from 01 September 2017 to 30 November 2017. Is he an Indian resident for the financial year 2017-2018?

Solution: Total no of days = 30 (april) + 31 (may) + 30 (june) + 31 (july) + 30 (sept) + 31 (Oct) + 30 (Nov) = More than 182 .Since Mr. Bill Gates stayed in India for more than 182 days, he would be a Resident Indian for the financial year 2017-18.

ii) Mr. Bill Gates stayed in India from 01 April 2017 to 31 July 2017 and from

• 01 September 2013 to 30 November 2013
• 01 September 2014 to 30 November 2014
• 01 September 2016 to 31 March 2017

Is he an Indian resident for the financial year 2017-2018?
Solution: Mr Bill Gates stayed in India :
In F.Y. 2017-18 Period of Stay= 122 days(30+31+30+31) and
Prior Financial Years =

Condition (i) = 122 Days (You have stayed for 60 days or more during the financial year)
and
Condition (ii) = 394 Days( A total of 365 days or more during 4 years immediately prior to that financial year)

Thus, he is said to be Resident Indian for the financial year 2017-18
But, in some cases, the 2nd condition mentioned above (60 days & 365 days) doesn't apply.

Exceptions to the Second Condition in the case of Resident Indian :

The 2nd condition mentioned above (60 days & 365 days) doesn't apply in case of

1. An Indian citizen who has left India for the purpose of employment in a foreign or a crew member of an Indian ship, OR
2. An Indian Citizen or person of Indian origin who comes to visit India

Thus, in these cases, only if you stay in India for a period of 182 days or more in the Financial year, you are said to be a Resident Indian.

Examples of Residential status of an individual

Miss Priyanka Chopra went to work outside India for the first time.

• She stayed in India from 01 April 2017 to 31 October 2017.
• She stayed in India from 01 April 2017 to 31 May 2017

Is she an Indian resident for the financial year 2017-2018?

Solution:

1. Miss Priyanka Chopra stayed in India for 214 Days(at least 182 days ), she is said to be Resident in India for the financial year 2017-18.
2. Miss Priyanka Chopra stayed in India for 61 Days(at least 60 days ), she is NOT said to be Resident in India for the financial year 2017-18 , since she left India for work . Therefore, only the first condition for determining the residential status would be applied.

When Does a Person Become an NRI in India?

If "NONE" of the above-mentioned basic conditions (365 or 60 days rules) are fulfilled, then you are said to be a Non-resident in India.

Example: Bill Gates came to visit India on 26 January 2018, during the Republic Day ceremony in India.

Solution: Bill Gates will be a Non-resident of India because he stayed for less than 182 days and does not even satisfy the 60-day condition.

Conclusion :

Once our residential status is decided. Next comes the relevance of residential status to our tax liabilities in the queue.

How is Income Taxed According to Different Residential Status in India?

Important Points

1. Income received outside India but subsequently sent to India subsequently, does not amount to receiving income in India. 1st receipt is important for consideration;
2. A person of Indian origin is defined as someone who, either himself, one of his parents, or of his grandparents were born in Undivided India.

Now that we know the difference between Residents and Non-Residents. Let's get into detail and see if you are are ordinary resident or a non-ordinary resident to understand your tax liability in India.

Who is Resident but Not Ordinarily Resident Indian (RNOR)?

Once you are clear about your residential status between resident and non-resident. To further understand Resident but Not Ordinarily Resident Indian (RNOR) we need to first learn the additional conditions.

Resident but Not Ordinarily Resident Indian (RNOR)

A person other than OR will be called an RNOR if he satisfies the below conditions.

Any one of the two basic conditions of 182 or 60 days
+
Any or none of the two additional conditions of 2 years & 730 days

Example:-
Mr Atif Aslam came to India from 01 July 2017 to 28 Feb 2018 for the first time.

Solution: Since Mr. Atif Aslam came to india for first time in last year and stayed for 243 days(31+31+30+31+30+31+31+28) (at least 182 days), he is resident Indian. But since he Does not satisfy any additional condition of 2 years or 730 days he will be termed as – Not ordinary resident of india.

Conclusion:
Saying in Income Tax:

"An Indian Citizen may not be a resident Indian, but A Foreign Citizen may be a resident Indian."

The non-understanding of correct residential status creates an air of confusion about tax liability in India.

If you need any assistance determining your residential status, you can contact our tax experts by phone or WhatsApp at +91 91166 84439.

Residential Status of an Individual

While computing the period of stay in India, both the day of entering India and the day of leaving India shall be counted in the period of stay in India.