How To Determine Residential Status in India

Like most other countries taxability of an individual in India depends upon his residential status in India. Determination of Residential status in India is very important in Income Tax Act as tax liability depends on it. This Article “How To Determine Residential Status in India” covers residential status in India for all assesees.

This article covers following Questions:


  1. Who is Resident as per income tax Act
  2. Who is Resident but Not Ordinarily Resident as per income tax Act
  3. Who is Non Resident as per income tax Act
  4. How to determine Residential status of Individual
  5. How to determine Residential status of HUF
  6. How to determine Residential status of Partnership Firm
  7. How to determine Residential status of AOP/BOI
  8. How to determine Residential status of Company
  9. Residential Status Calculator by Income Tax Department

An assessee is either (a) resident in India; or (b) non-resident in India.
However Individual and HUF may be-
(a) Resident and ordinarily resident; or
(b) Resident but not ordinarily resident
(C) Non Resident
All other assessess are either Resident or Non-Resident.

How to determine Residential status of Individual:

  1. Resident:A resident taxpayer is an individual who satisfies one of the following conditions:
    • Resides in India for a minimum of 182 days in a year.
    • Has resided in India for a minimum of 365 days in the immediately preceding four years. In addition, he must reside in India for a minimum of 60 days in the current financial year.
  2. Resident but Not Ordinarily Resident:
    There is a further classification under the resident status–

    • Resident Ordinarily Resident (ROR) and
    • Resident Not Ordinarily Resident (RNOR).

If both the conditions below are met, he will be a ROR:

  • He has resided in India for at least 2 out of 10 immediate previous years.
  • He has resided in India for at least 730 days in seven immediately previous years.

The person who doesn’t satisfies both of the above conditions is a resident but not ordinarily resident.

3. Non Resident:

An individual who does not fall under either of the above categories can be considered as a non-resident.

Note: There is an amendment in Tax Residency Rules in Finance Act, 2020, The Provisions of Residential status for Non Resident shall be Change accordingly. There is a separate article on this, Please go through that by clicking here

How to determine Residential status of HUF:

  1. Resident
A Hindu Undivided Family (HUF) is said to be resident in India if the control and management of its affairs are wholly or partly situated in India.
2. Resident and ordinarily resident
A resident HUF is treated as Resident and ordinarily resident in India if the Karta (inclusive successive karta) satisfies satisfies both of the following conditions-
(i) he has been resident in India in at least 2 out of 10 years immediately preceding the relevant year
(ii) he has been in India for a period of 730 days or more during 7 years immediately preceding the relevant year.
If karta doesn’t satisfies any of the above conditions then HUF is treated as Resident but not ordinarily resident.
3. Non Resident:
If HUF’s control and management is situated wholly outside India then it is treated as non resident.

How to determine Residential status of Firm/ AOP:

A partnership firm or association of persons is said to be resident in India if then control and management of its affairs wholly or partly situated within India during the relevant previous year. It is however treated as non resident in India if the control and management of its affairs are situated wholly outside India.

How to determine Residential status of Company:

  1. An Indian company is always resident in India.
2. Residential status of foreign company from Assessment year 2016-17:
A foreign company will be resident in India if its place of effective management (POEM) during the relevant previous year is in India. For this purpose, the place of effective management means a place where key management and commercial decisions that are necessary for the conduct of the business of an entity as a whole are in substance made. For this purpose a set of guiding principles to be followed in determination of POEM may be issued by the Board of the benefit of the taxpayers as well as tax administration.

 

Residential Status Calculator By Income Tax Department 

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