BAJAJ BROKING
May 05, 2025
5 mins read
Shekhar, a 30-year-old engineer, works in Dubai. However, he often visits India and spends quite some time with his family and friends. Last year, he stayed in India for around 190 days, which ultimately made him a “resident" under Income Tax regulations. This means his global income, including his salary earned in Dubai, was taxable in India last year. While Shekhar had some idea of these changes, he wasn't very sure what it would do to his income tax residential status. He did, however, soon realise the importance of residential status and how it could affect him.
The Residential Status under the Income Tax Act plays a crucial role in deciding how much income of an individual is taxable in India. Thus, the Income Tax Department needs to determine the residential status of an individual or a company. In fact, this becomes more crucial during the filing of the taxes. Understanding the income tax residential status is important as it affects your tax obligations, for filing tax returns, understanding your eligibility for different treaties, and much more.
Curious to learn more about income tax residential status? Well, read on as we explore more about the residential status of an individual, how to determine the same, what are its exceptions, classification, and much more in detail.
The residential status of an individual is determined or based on the total number of days they end up spending in India during a given financial year. Based on the same, the income tax regulations classify the taxable individuals in the country in certain categories. This includes:
Resident and Ordinarily Resident or ROR
Non-resident
Resident but Not Ordinarily Resident or RNOR
Residential status is a separate term provided by the laws and regulations of Income Tax laws in India. However, you need not to confuse it with Indian citizenship. This ultimately means an individual can be a citizen of India but he may not qualify for residential status for a particular financial year. Alternatively, a foreigner who is not a citizen of India might end up falling in the category of residential status for income tax purposes.
Now, there are certain exceptions to the income tax residential status. Here are some of these cases:
Indian Individuals Earning Abroad
Indian Individuals or citizens who choose to work abroad as a crew member of the ship for employment purposes are to be considered residents only if they stay here for not less than 182 days in a particular financial year.
Deemed Resident of India
An Indian individual who is a citizen of India and has earnings for more than ₹15 lakhs with tax obligations in no other country is also considered a resident for taxation.
Indian Individuals with Certain Income
An Indian citizen or a POI (Person of Indian Origin) living outside of India, having a total income being more than ₹15 lakhs can be given residential status if:
They stayed here for 182 days and more during the previous year.
If they have stayed here for more than 365 days in the last four years or have been here for no less than 120 days in the last year.
Now that you know the importance of the residential status of an individual, its exceptions, and more, let's move forward. Here is the classification of residential status as per the income tax assessment order.
Resident
An individual taxpayer is considered a resident in India if they align with one of these criteria.
If your stay in India is 182 days or more during the previous year.
In case you have stayed in India for at least 365 days during the last four preceding years or more than 60 days in the given financial year.
Non-Resident
An individual is considered to be a non-resident if they haven't qualified the criteria for being a resident.
An individual is deemed non-resident if they have stayed here for less than 182 days in a particular financial year.
In case they have stayed in India for more than 60 days, however, they aren't able to meet the 365 days criteria over the last four years.
Resident but Not Ordinarily Resident
Once you've qualified for the classification of a resident, the next step is to determine if you're a resident and ordinarily resident or resident but not ordinarily resident.
An individual is an ROR in case they have stayed here for at least two years in the last 10 years.
Or if your stay in India is not less than 730 days over the last immediate seven years.
Someone who follows just one or neither of these criteria is considered an RNOR.
Now that you know the different classifications of residential status, let's move forward. Here is a table to help you quickly understand the tax implications of each of these categories.
Category | Tax Implication |
Resident | A resident has to pay taxes on his total income. This includes the income generated from anywhere, including India as well as abroad. |
Resident but Not Ordinarily Resident or Non-Resident | A non-resident or RNOR is eligible to be taxed on just the income generated in India. This means that the income they generate outside India, i.e., international earnings, need not be taxed in India. Further, in cases of double taxation of your income, meaning in case it has been taxed in India as well as outside, you can consider opting for a Double Taxation Avoidance Agreement or DTAA, in case India has agreed with the other country to help you avoid your double tax paying liabilities. |
You can easily calculate your residential status once you understand the different categories and their criteria. Here is how you may easily understand your income tax residential status.
Consider understanding if you qualify to be in the exceptions of residential status.
Now, consider adding your duration of stay in India and if it aligns with the criteria of 182 days or not. Based on the same, you can understand if you classify as a resident or non-resident.
Residential status is crucial to understand your tax liability in the country. Understanding the same is important to avoid any kind of tax mistakes, double taxation, and much more. Having a thorough understanding of residential status and its classification can also help you understand your tax compliance and make the most out of tax advantages.
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Determining the residential status for income tax purposes helps you understand your tax liabilities and obligations. This also helps you understand the scope of your taxation, enjoy tax benefits and return filing, and much more.
The 182-day rule plays a crucial role in determining the residential status of an individual. This means if someone has stayed for 182 days or more during the previous relevant year, only then do they qualify for residential status.
Yes, a person can be a citizen of India but a non-resident for tax purposes. Residential status is different from Indian citizenship. Your residential status depends on your total income and duration of stay in India.
A non-resident is eligible to be taxed on just the income generated in India. This means that the income they generate outside India, i.e., international earnings, need not be taxed in India.
The residential status does affect your foreign income taxation. This means if you're an ROR, your total income is taxed, including your domestic as well as income earned from abroad. And then, it is taxed as per the tax slabs in India.
Yes, a new section 6(1A) has been added to the Income Tax Act, 1961 by the Finance Act, 2020. The section provides that an Indian citizen shall be considered a resident only if their entire income, excluding the income from foreign sources, is more than ₹15 lakhs in the given previous year.
To calculate your residential status for the current financial year, first consider understanding the exceptions. Then, evaluate your total income and duration of stay to complete your calculation.
To substantiate your residential status, here is a list of some documents that may come in handy to speed up the process.
Aadhar Card
PAN
Period of Residential Status
Tax Identification Number
Nationality
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