Residential status of an assessee is important in determining the scope of income on which income tax has to be paid in India. Broadly, an assessee may be resident or non-resident in India in a given previous year.
Residential status of an Individual & Hindu Undivided Family
Under Section 6(1), an individual is said to be resident in India in any previous year if he satisfies any one of the following basic conditions:
- He is in India in the previous year for a period of at least 182 days or,
- He is in India for a period of at least 60 days during the relevant previous year and at least 365 days during the four years preceding that previous year.
In case an Indian citizen leaves India for employment abroad in any year for the purpose of employment (or where an individual, who is a citizen of India, leaves India as a member of the crew of an Indian ship), or where an Indian citizen or a person of Indian Origin, who has settled abroad, comes on a visit to India in the previous year, shall not attract above mentioned basic condition no. 2. Their residential status is tested only on the basis of condition no. 1. If they do not satisfy the condition no. 1, they are said to be non-resident for that previous year.
For other individuals who does not satisfy either of the above basic conditions is non-resident for that previous year.
A Hindu Undivided Family (HUF) is said to be resident in India if control and management of its affairs is wholly or partly situated in India during the relevant previous year.
A resident individual or HUF assessee may further be classified into
- Resident and ordinarily resident (ROR
- Resident but not ordinarily resident (RNOR)
A resident individual or HUF is treated as ROR in India in a given previous year, if he satisfies the following both additional conditions:-
- He has been resident in India in at least 9 out of 10 previous years (according to basic conditions noted above) preceding the relevant previous year; and
- He has been in India for a period of at least 730 days during 7 years preceding the relevant previous year.
An individual or HUF becomes ROR in India if the individual or Karta of HUF satisfies at least one of the basic conditions and both the additional conditions. An individual or Karta of HUF who is resident in India but does not satisfy both the additional conditions is RNOR for that previous year.