RESIDENTIAL STATUS [SECTION 6] – DETAILED NOTES

1. Importance of Residential Status

 Residential status of ssessee is critical determinant for incidence (scope) of tax.
2. Classification Based on Residential Status
For Individuals and Hindu Undivided Families (HUF):
1. Resident and Ordinarily Resident (ROR)
2. Resident but Not Ordinarily Resident (RNOR)
3. Non-Resident (NR)
For All Other Assessees (Firms, Companies, AOPs, etc.):
1. Resident
2. Non-Resident
3. Key Points
 Residential status is determined for each Previous Year (PY).
 A person’s status may change from year to year.
 An individual can be resident in more than one country for tax purposes.
 Citizenship, place of birth, or domicile are not relevant to determine tax residency.

1.1 Residential Status of Individuals [Section 6(1)]

An individual is Resident in India if any one of the following 2 conditions is satisfied:
Basic Conditions:
Condition
Description
No.
(i) stayed in India for 182 days or more during the relevant previous year.
stayed in India for 365 days or more during the 4 years immediately preceding the
(ii)
previous year, and stayed at least 60 days in the relevant previous year.

Definition of Stay in India:

 Includes territorial waters of India (up to 12 nautical miles).
 Stay need not be continuous or at the place of work or residence.
 Both date of arrival and date of departure are included in stay count.

Exceptions to the 60-Day Condition (Second Basic Condition)

The 60-day minimum requirement is replaced by 182 days in the following cases:
Category Condition
Indian citizen leaving India during previous year for employment outside India, or as a
(1)
crew member of an Indian ship
(2) Indian citizen or Person of Indian Origin (PIO) visiting India in the previous year
These individuals are considered Resident only if their stay in India during the year is 182 days
or more.
If less than 182 days → Non-Resident, even if 60-day + 365-day condition is satisfied.

Special Rule for High-Income Individuals (from AY 2021-22 onwards)

If a person:
 Is an Indian citizen or PIO visiting India, and
  Has total income exceeding ₹15 lakhs (excluding foreign income),
Then, the following applies:
Stay in India Residential Status
≥ 182 days Resident
≥ 120 days in PY and ≥ 365 days in preceding 4 years Resident
Less than above Non-Resident
Note: Stay of 120 days alone is not enough. Must also satisfy 365 days in 4 preceding years.

DETERMINATION OF PERIOD OF STAY IN INDIA FOR INDIAN CREW MEMBERS of a

foreign-bound ship leaving India
As per Finance Act inserted Explanation 2 to Section 6(1) of Income-tax Act, 1961.
Rule 126 of Income-tax Rules, 1962
certain periods are excluded from calculation of "stay in India" for determining residential status.
Period to be Excluded from Stay in India
Period Starts From Period Ends On
Date entered in Continuous Discharge Date entered in CDC for signing off from the
Certificate (CDC) for joining ship by ship by individual for that voyage
individual for eligible voyage
Term Meaning
Eligible Voyage Voyage undertaken by ship engaged in carriage
of passengers or freight in international
traffic, where:
(i) The voyage originates from an Indian port
and ends at a foreign port, or
(ii) The voyage originates from a foreign port
and ends at an Indian port.
Continuous Discharge Certificate (CDC) An official seafarer document that records the
date of joining and sign-off from each voyage.
Maintained by Indian seafarers as per Merchant
Shipping Rules.
Important Notes
 only for eligible international voyages.
 only if the seafarer is an Indian citizen.
 If the ship is engaged in coastal or domestic shipping, Rule 126 does not apply.
 This rule is crucial for determining if the seafarer crosses the 182-day threshold or not
(especially for non-resident status).
Deemed Resident [Section 6(1A)] and RNOR vs ROR [Section 6(6)]

1. Deemed Resident – Section 6(1A)

To plug tax avoidance loopholes, Deemed Residency was introduced through Section 6(1A)
(effective from A.Y. 2021–22 onwards).
 Who is a Deemed Resident?
An individual is deemed to be a resident in India (even if he does not satisfy basic conditions
under Section 6(1)) if:
Condition Explanation
1. The individual is a citizen of India
His total income (excluding income from foreign sources) exceeds ₹15 lakhs during
2.
the previous year
He is not liable to tax in any other country or territory by reason of his domicile,
3.
residence, or any similar criteria
However, this provision does not apply if the individual is already resident in India as per
Section 6(1).

Meaning of “Liable to Tax”

"Liable to tax" means that the person is legally subject to income tax in that foreign country under
its tax laws, even if:
 Actual tax is not paid (due to exemptions, thresholds, or tax treaties),
 Or tax rate is zero.
Thus, nominal or zero liability does not disqualify, but complete exemption due to
domicile/residence rule leads to deemed residency in India.

2. Resident and Ordinarily Resident (ROR) vs Resident but Not Ordinarily Resident (RNOR)
Who can be RNOR?
Only:
 Individuals, and
 HUFs
can be classified as Resident but Not Ordinarily Resident (RNOR).
All other assessees (e.g., companies, firms) are either Resident or Non-Resident only.

Conditions for RNOR – Section 6(6)

A resident individual is classified as RNOR if any one of the following is satisfied:
Condition Explanation
The individual has been a non-resident in 9 out of 10 previous years preceding the
(i)
relevant previous year
The individual has been in India for a period of 729 days or less during the 7 years
(ii)
preceding the relevant previous year
The individual is a citizen of India or person of Indian origin, who comes on a visit to
(iii) India, having total income (excluding foreign income) exceeding ₹15 lakhs, and has
stayed in India for 120 days or more but less than 182 days in the previous year
(iv) The individual is an Indian citizen deemed to be resident under Section 6(1A)
If any one of the above conditions is satisfied, the person becomes Resident but Not
Ordinarily Resident (RNOR).
If none are satisfied, and the person is a resident under section 6(1), then he is Resident and
Ordinarily Resident (ROR).

Note for Foreign Nationals

A foreign national (not an Indian citizen or PIO) is RNOR if:
 (i) He was non-resident in 9 out of 10 previous years preceding the relevant previous year,
or
 (ii) Was in India for 729 days or less in 7 preceding years.
Summary Table – ROR vs RNOR
Criteria ROR RNOR NR
Resident under Section 6(1)
Non-resident in 9 out of 10
—
preceding years
Stay ≤ 729 days in 7 preceding
—
years
(if stay (if stay 120–181 & (if stay <120 days or
Indian citizen/PIO visiting India
≥182) income > ₹15L) income ≤ ₹15L)
Deemed resident under 6(1A) (if ROR) (if RNOR)

Residential Status of HUF [Section 6] – Detailed Notes

A. Basic Residential Status of HUF

Residential
Criteria
Status
If control and management of its affairs is wholly or partly in India during the
Resident
previous year.
If control and management of its affairs is wholly situated outside India during
Non-Resident
the previous year.
If even a part of control and management is in India → Resident HUF.

Meaning of “Control and Management”

 Refers to central control and management, not day-to-day operations.
 It implies actual (de facto) control, not merely the right to control.
 Control may be exercised by Karta or other senior members.
 Presence of a house or residence in India is not enough to prove control unless decisions
are made from there.
Key Clarifications:
Situation Is it Control & Management in India?
Business operated outside India, but decisions made in
Yes
India
Family owns a house in India, but all decisions taken abroad No
Registered office in India, but key decisions taken abroad No