Residential Status Am I Resident Or Non-Resident?

July 8, 2016 - Income Tax for Starters (Basics)

(Last Updated On: March 9, 2017)

Being an Indian citizen but living in the foreign land, do I need to pay my taxes in India? Or being a foreign citizen and earning
income in India, Am I liable to pay taxes in India? Non-understanding of correct residential status creates a buzz for persons
residing outside India or the persons visiting foreign for most of the year. There remains an air of confusion as to whether
taxes are to be paid in India and quantum of such taxes, provisions if income is earned in India or outside India etc. As the
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 saying goes in Income Tax:

An Indian Citizen may not be resident Indian, but A Foreign Citizen may be resident Indian. So by todays blog, we wish to
make you understand the concept of residential status and how it affects tax levy.

Residential status constitutes of two main categories Resident or Non resident

1. Who is Resident in India?

Upon fullling ANY ONE of the following two conditions (known as basic conditions), the person is said to be resident in India
for the concerned Financial Year. The conditions are:

1. Person has stayed in India for 182 days or more during the concerned F.Y.; or

2. A person has stayed for 60 days or more during the concerned F.Y. and a total of 365 days or more during 4 years
immediately prior to concerned F.Y.

Exceptional case

The 2nd condition mentioned above (60 days & 365 days) doesnt apply in case of

1. An Indian citizen who has left India for the purpose of employment in foreign, or

2. An Indian Citizen or person of Indian origin who comes to visit India.

Thus in these cases, if the person stays in India for a period of 182 days or more in the concerned F.Y., he is said to be
Resident in India.

2. Who is Non-Resident (NR) in India?

If NONE of the above-mentioned conditions is fulfilled, then the person is to be Non-resident in India.

3. Difference between Ordinarily Resident (OR) and Not-Ordinarily Resident (NOR)

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 After deciding if a person is a resident in India, next comes the question of deciding whether he is an Ordinarily Resident or
Not-Ordinarily Resident.

4. How income is taxed according to different residential status?

Levy of Tax (Yes/ No)

Particulars
Ordinarily, Not-Ordinarily Non-
Resident Resident Resident

Income received or deemed to be

Yes Yes Yes
received in India

Income accrued or deemed to be

Yes Yes Yes
accrued in India

Income accruing outside India Yes No No

Mark a note of these points:

1. Income received outside India, but subsequently remitted to India doesnt amount to receiving of income in India. 1st
receipt is important for consideration;

2. While counting period of stay, continuous stay or stay at a particular location in India doesnt matter;

3. Person of Indian origin means a person who himself, either of his parents or either of his grandparents (both paternal
and maternal) were born in Undivided India.

4. While computing the period of stay in India, both the day of entering in India and the day of leaving India shall be
counted in the period of stay in India.

Practical examples to understand the concept better:

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 Case 1: Bill Gates, owner of Microsoft comes to India for 100 days every year. What shall be his residential status for A.Y. 2016-
17 (F.Y. 2015-16)?

Solution: Bill Gatess residential status shall be determined in 2 steps:

Step 1: Total stay of Bill Gates in last 4 years preceding 2015-16 (Concerned F.Y.) is 400 days (i.e. 100 * 4) and his stay in F.Y.
2015-16 is 100 days. Therefore, since he has satisfied the 2nd condition of the basic conditions, he is a resident in India.

Step 2: His total stay in India in last 7 years preceding F.Y. 2015-16 is 700 days (i.e. 100 * 7), he satises the 2nd condition of the
additional conditions, hence he is Not-Ordinarily Resident (NOR) in India.

Thus, for AY 2016-17, Bill Gates shall be the resident but Not Ordinarily Resident (NOR).

Case 2: Sachin, an Indian citizen, leaves India on 22nd September 2015 for the rst time, to work as an employee of a company
in America. What shall be his residential status for A.Y. 2016-17 (F.Y. 2015-16)?

Solution: During the F.Y. 2015-16, Sachin was in India for 175 days i.e. 30 (April) + 31 (May) + 30 (June) + 31 (July) + 31 (August) +
22 (September) . Since he is leaving India for purpose of employment, hence the 2nd condition of basic condition shall not be
applicable for him. He doesnt full the 1st condition of basic conditions also. Hence he shall be Non-Resident in India for F.Y.
2015-16.

If you still nd diculties in determining the residential status or have problems related to tax levy in any of the residential
status, feel free to reach us. We are working hard so that you can live a tax-tensions-free life.

Author

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 Team Tax2win

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