Taxability of income in India depends upon the residential status of an individual which is categorized as:
Resident and Ordinarily Resident (ROR)
Resident Not Ordinary Resident (RNOR)
Points to Remember:
Residential status applies for one FY. Accordingly, it may be necessary to evaluate residential status on a yearly basis.
Residential status as per the Income-tax Act differs from residential status as per FEMA. Accordingly, it may be necessary to evaluate the residential status under both laws.
In the following cases, a person may be NR if he is present in India for less than 182 days:
Being a citizen of India and leaving India as a member of the crew on a ship of the Indian Merchant Navy
Being a citizen of India or a Person of Indian Origin leaving India for the purposes of employment outside India
Being a citizen of India and a NR, returning to India for the purposes of visit.
Frequently asked questions
Who is treated as a Person of Indian Origin as per the Income-tax Act?
A person shall be deemed to be of Indian origin if he, or either of his parents or any of his grand-parents, was born in undivided India.
Is the date of arrival in India and date of departure from India included while calculating number of days of stay in India?
Yes, while calculating the number of days of stay in India, date of arrival and date of departure from India shall be treated as one day of stay in India each.
Mr. Virat, an Indian citizen leaves India for the first time on July 1, 2018 for taking up employment abroad. He does not return to India till March 31, 2019. What will be his residential status for FY 2018-19?
In the following cases only the condition of stay in India for less than 182 days is applicable for Residential Status to be NR:
In case of a NR, who is citizen of India or Person of Indian Origin, who is on visit to India, or;
In case of a person, who is citizen of India, and leaves India for employment outside India or as a member of the crew of an Indian ship.
Accordingly, he shall be a NR for FY 2018-19 under the provisions of the Income-tax Act, as his stay in India is less than 182 days for the said FY.
Ms. Kate, a Person of Indian origin is settled overseas since 1996. She comes on a visit to India in FY 2017-18 on June 1, 2017 and leaves India on February 1, 2018. For the past 15 years, her days of stay in India were less than 180 days per year, however her total stay for the last 7 years in India was around 1000 days. What will be her residential status for FY 2017-18?
She shall be a resident for FY 2017-18, as her stay in India for FY 2017-18 is more than 182 days.
However, she shall not be ROR despite her stay for the past seven years exceeding 729 days, as she has been a NR for all the past ten years by virtue of her stay in India being less than 182 days for the past ten years. Accordingly, her residential status for FY 2017-18 shall be that of a RNOR.
Mr. Rohit, a Person of Indian Origin left India for the purpose of employment in July 2016. He visited India for a total of 162 days in FY 2018-19. What will be his residential status in the said year?
Mr. Rohit will be an NR in India for FY 2018-19. Although he has stayed in India for more than 60 days, he being a Person of Indian Origin leaving India for the purpose of employment, shall be considered to be a resident only if he has stayed in India for a period exceeding 182 days.
During FY 2016-17, an Indian citizen left India for the purposes of employment overseas on August 1, 2016. He came on a visit to India on January 20, 2017 and left for the foreign country on February 1, 2017. What shall be his total number of days of stay in India?
His stay in India for FY 2016-17 will be 136 days (April 1, 2016 to August 1, 2016 - 123 days and January 20, 2017 to February 1, 2017 - 13 days). The day of leaving India and returning to India both will be calculated as ‘stay in India’ for the purposes of counting number of days of stay in India.
An Indian citizen is leaving India for the first time for taking-up employment overseas. What is the best time for his departure from India?
As it is his first year of leaving India for the purposes of employment, being an Indian citizen, he will become a resident in India only if his stay in India for the concerned FY is 182 days or more. Hence, he should leave India on or before September 28 to have the status of NR for that FY.
If he fails to do so, by virtue of taxation of global income for residents, his foreign sourced income may also become taxable in India and hence he needs to plan his departure to avoid such a situation.
If an Indian citizen settled overseas wishes to return to India for good, what is the best time for her to do so?
As a NR, she should try to come back on or after February 1 (or February 2 in case of a leap year). However, if her stay in India in prior 4 previous years does not exceed 365 days, then she may return after October 2 (or October 3 in case of a leap year). In both the cases, she will continue to remain NR for that FY ensuring her income earned outside India shall not be taxable in India for that FY.