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Tuesday, 6 August 2013

How to Determine the Residential Status of an Individual

The residential status of a person is required to be determined for each assessment year in order to determine the scope of total income. The following flow chart explain how to determine your residential status.


General Guidelines for determining Residential Status

A person (Individual) is said to be resident in India in any previous year, if he satisfies any one of the following conditions:
i) He has been in India during the previous year for a total period of 182 days or more, or
(OR)
ii) He has been in India during the 4 years immediately preceding the previous year for a total period of 365 days or more and has been in India for at least 60 days in the previous year.
If the individual satisfies any one of the conditions mentioned above, he is a resident. If both the above conditions are not satisfied, the individual is a non-resident.

Notes:

  • The term “stay in India” includes stay in the territorial waters of India (i.e. 12 nautical miles into the sea from the Indian coastline). Even the stay in a ship or boat moored in the territorial waters of India would be sufficient to make the individual resident in India.
  • It is not necessary that the period of stay must be continuous or active nor is it essential that the stay should be at the usual place of residence, business or employment of the individual.
  • For the purpose of counting the number of days stayed in India, both the date of departure as well as the date of arrival are considered to be in India.
  • The residence of an individual for income-tax purpose has nothing to do with citizenship, place of birth or domicile. An individual can, therefore, be resident in more countries than one even though he can have only one domicile.

Exceptions for certain person

The following categories of individuals will be treated as residents only if the period of their stay during the relevant previous year amounts to 182 days. In other words even if such persons were in India for 365 days during the 4 preceding years and 60 days in the relevant previous year, they will not be treated as resident.
(1) Indian citizens, who leave India in any previous year as a member of the crew of an Indian ship or for purposes of employment outside India, or
(2) Indian citizen or person of Indian origin* engaged outside India in an employment or a business or profession or in any other vocation, who comes on a visit to India in any previous year
* A person is said to be of Indian origin if he or either of his parents or either of his grandparents were born in undivided India.

Now I Know I’m a Resident. What’s Next?

The next step is you have to find whether you are Ordinarily resident (ROR) or Not ordinarily Resident (RNOR). Only individuals and HUF can be resident but not ordinarily resident in India. All other classes of assessees can be either a resident or non-resident.
A not-ordinarily resident person is one who satisfies any one of the following conditions
  • If such individual has been non-resident in India in any 9 out of the 10 previous years preceding the relevant previous year, or
  • If such individual has during the 7 previous years preceding the relevant previous year been in India for a period of 729 days or less.
In Simple words, If the individual satisfies both the conditions mentioned above, he is a resident and ordinarily resident but if only one or none of the conditions are satisfied, the individual is a resident but not ordinarily resident. You may also use our Residential status calculator (excel) to calculate your residential status.

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