Residential Status

Residential Status determines how an individual is taxed in India under the Income Tax Act. It defines whether a person is taxed on global income or only on income earned in India.

It is one of the most important concepts in taxation.

1. Types of Residential Status

An individual can fall into one of three categories:

• Resident and Ordinarily Resident (ROR)
• Resident but Not Ordinarily Resident (RNOR)
• Non-Resident (NR)

Each category has different tax implications.

2. Basic Conditions for Residency

A person is considered a resident if:

• Stayed in India for 182 days or more during the financial year, OR
• Stayed in India for 60 days or more in the financial year and 365 days or more in the preceding 4 years
  (subject to certain exceptions)

3. Additional Conditions

To qualify as Ordinarily Resident (ROR):

• Resident in India for at least 2 out of last 10 years, AND
• Stayed in India for 730 days or more in last 7 years

If these are not satisfied → RNOR

4. Taxability Based on Status

• ROR: Taxed on global income
• RNOR: Taxed on Indian income + certain foreign income
• NR: Taxed only on income earned or received in India

5. Importance of Residential Status

It determines:

• Scope of taxable income
• Reporting requirements (foreign assets, income)
• Eligibility for DTAA benefits
• Compliance obligations

6. Common Mistakes

• Assuming citizenship determines tax status
• Not calculating days correctly
• Ignoring additional conditions
• Not reporting foreign income

Practical Insight

Most people confuse:

• nationality
• residency
• taxability

They are completely different.

Tax depends on:
👉 how long you stay in India, not your passport.

Getting this wrong can:

• increase tax liability
• trigger notices
• create compliance issues

How N D Savla & Associates Can Help

At N D Savla & Associates, we help you:

• Determine correct residential status
• Plan tax-efficient structuring of income
• Handle cross-border taxation issues
• Ensure accurate reporting and compliance