Residential Status for Income Tax

Residential status refers to a person’s status in relation to how long they have lived in India over the last five years. A taxpayer’s income tax burden is determined by his or her residence status during the financial year and the four years before the financial year. In addition, when filing income tax returns, the individual must disclose the appropriate residency status. The Income Tax Act divides taxpayers into three categories based on their residence status:

Residential Status for Income Tax

  • Although a resident, he is not a regular resident.
  • Normally residing.
  • Non-resident.

Resident but Not Ordinarily Resident

In any financial year, an individual is a resident but not ordinarily resident in India if the assessee meets one of the following two criteria: 

  1. the taxpayer is in India for 182 days or more in that year, or 
  2. the taxpayer has been in India for at least 365 days in the four years immediately preceding that year and is in India for 182 days or more in that year.

Ordinary Resident

In any financial year, a person is said to be “not ordinarily resident” in India if they are: 

  1. An individual who has been a non-resident in India in nine of the ten previous financial years preceding that year, or has been in India for a period of, or periods totaling, seven hundred and twenty-nine days or less during the seven financial years preceding that year; or
  2. Hindu Undivided Family (HUF) whose manager has been a non-resident in India for nine out of the ten financial years preceding the relevant financial year or has been in India for a period of, or periods totaling, seven hundred and twenty-nine days or less during the seven financial years preceding that year. As a result, an “ordinary inhabitant” is someone who does not fall under the preceding description.Residential Status for Income Tax

Non-Resident

In any financial year, if the taxpayer does not meet any of the above-mentioned qualifications for a resident but is not normally a resident or an ordinary resident, he or she is considered a non-resident in India.