The Indian income tax law defines two category of Individuals for tax purposes namely, Resident and Non-Resident. Further the Resident category is classified into two parts i.e. Ordinary Resident and Not Ordinary Resident.
Tax Residential status of an Individual applies on a year on year basis and therefore, each Individual should check the category he/ she falls into.
Why is it necessary? The Indian income tax law has different tax treatment for incomes earned by each of this category. Hence, if you fall under one category, your income may not be taxable in India, on the other hand, if you fall under other category your income might be. Read: How does taxability change based on Residential status?
With the above background, let us understand the conditions for determining which Residential status you would fall into:
- Conditions for being a resident in India:
Condition I: An individual is in India for a period of 182 days or more in a financial year
Condition II: Individual is in India for 60 days or more during a financial year or 365 days or more during 4 years immediately preceding the relevant financial year
Only Condition I is to be tested if
a) Individual who is a citizen of India leaves India for the purpose of employment outside India during the financial year
b) An individual who is a citizen of India or a person of Indian origin and who comes to visit India during the financial year.
If the person is resident, the following condition would also be tested:
Not Ordinary Resident:
If he has been a non- resident in 9 out of 10 years immediately preceding the financial year
He has been in India for a period of 729 days or less in 7 years immediately preceding the financial year.