ARE YOU NON RESIDENT INDIAN – RESIDENTAL STATUS FOR INCOME TAX
To determine the residential status of an individual, the first step is to ascertain whether he is resident or non-resident. If he turns to be a resident, then the next step is to ascertain whether he is resident and ordinarily resident or is a resident but not ordinarily resident.
The taxability of an individual in India depends upon his residential status in India for any particular financial year. The term residential status has been coined under the income tax laws of India and must not be confused with an individual’s citizenship in India. An individual may be a citizen of India but may end up being a non-resident for a particular year. Similarly, a foreign citizen may end up being a resident of India for income tax purposes for a particular year.
Also to note that the residential status of different types of persons viz an individual, a firm, a company etc is determined differently. In this article, we have discussed about how the residential status of an individual taxpayer can be determined for any particular financial year
HOW TO DETERMINE RESIDENTIAL STATUS ?
For the purpose of income tax in India, the income tax laws in India classifies taxable persons as:
- A resident
- A resident not ordinarily resident (RNOR)
- A non-resident (NR)
The taxability differs for each of the above categories of taxpayers. Before we get into taxability, let us first understand how a taxpayer becomes a resident, an RNOR or an NR.
A taxpayer would qualify as a resident of India if he satisfies one of the following 2 conditions :
- Stay in India for a year is 182 days or more or
- Stay in India for the immediately 4 preceding years is 365 days or more and60 days or more in the relevant financial year
In the event an individual leaves India for employment during an FY, he will qualify as a resident of India only if he stays in India for 182 days or more. This otherwise means, condition (b) above of 60 days would not apply to him
Resident Not Ordinarily Resident
If an individual qualifies as a resident, the next step is to determine if he/she is a Resident ordinarily resident (ROR) or an RNOR. He will be a ROR if he meets both of the following conditions:
- Has been a resident of India in at least 2 out of 10 years immediately previous years and
- Has stayed in India for at least 730 days in 7 immediately preceding years
Therefore, if any individual fails to satisfy even one of the above conditions, he would be an RNOR.
An individual satisfying neither of the conditions stated in (a) or (b) above would be an NR for the year.
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