Residential Status for Income Tax – Individuals & Residents
The residential status of an individual plays a crucial role in determining their tax liability. It is essential to understand the different categories of residential status:
- Resident and Ordinarily Resident (ROR):
- An individual qualifies as an ROR if either of the following conditions is met:
- Stay in India for 182 days or more during the previous year.
- Stay in India for 365 days or more in the immediately preceding four years and 60 days or more in the relevant financial year.
- RORs are subject to tax on their global income (including foreign income).
- An individual qualifies as an ROR if either of the following conditions is met:
- Resident but Not Ordinarily Resident (RNOR):
- An individual falls into this category if they are an ROR in at least two out of the last ten years and have been non-resident in the seven preceding years.
- RNORs are taxed only on their Indian income and foreign income remitted to India.
- Non-Resident (NR):
- NRs are individuals who do not meet the criteria for ROR or RNOR.
- They are taxed only on their Indian income.
Exceptions to Residential Status:
- Indian Ship Crew Member: If an Indian citizen leaves India as a member of the crew of an Indian ship or for employment during the financial year, they qualify as a resident of India only if they stay in India for 182 days or more.
- Visiting Indian Citizens or Persons of Indian Origin: If an Indian citizen or a person of Indian origin stays outside India and visits India during the relevant previous year, they will be treated as a resident in India if:
- Their total income (excluding foreign sources) exceeds Rs. 15 lakhs during the previous year and they stay in India for 182 days or more.
Table: Taxability Based on Residential Status
Table
| Residential Status | Taxability |
|---|---|
| Resident and Ordinarily Resident | Taxed on global income (including foreign income) |
| Resident but Not Ordinarily Resident | Taxed on Indian income and foreign income remitted to India |
| Non-Resident | Taxed only on Indian income |
Examples:
- Rahul is an Indian citizen who stayed in India for 200 days during the previous year. He is an ROR and will be taxed on his global income.
- Lena, an Indian citizen, visited India for 190 days during the previous year. Her total income (excluding foreign sources) exceeded Rs. 15 lakhs. She is treated as a resident and will be taxed on her Indian income.
Frequently Asked Questions (FAQs)
- Q: What is the significance of residential status in income tax?
- A: The residential status determines the scope of an individual’s total income that is chargeable to tax. It affects the taxability of an individual’s income.
- Q: Is residential status the same as citizenship?
- A: No, residential status is different from citizenship. It is determined based on an individual’s stay in India during the previous year.
- Q: How can I determine my residential status?
- A: You can determine your residential status based on the criteria mentioned earlier (ROR, RNOR, or NR). Consider your stay in India and other relevant factors.
- Q: What if I exceed the Rs. 15 lakh income threshold during my visit to India?
- A: If your total income (excluding foreign sources) exceeds Rs. 15 lakhs during your visit to India, you will be treated as a resident and taxed accordingly.
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