Residential status of an individual (section 6)

Introduction

Residential status decides how much of a person's income India taxes. It is determined separately for each tax year, by the number of days the individual is physically in India, under section 6 of the Income-tax Act, 1961 (now section 6 of the Income-tax Act, 2025, with the same rules). An individual is (a) resident and ordinarily resident (ROR), (b) resident but not ordinarily resident (NOR), or (c) non-resident (NR). Citizenship and domicile do not decide status, except in the special rules below.

Step 1: Resident or non-resident (section 6(2))

An individual is resident in a tax year if he meets either basic condition:

1. he is in India for 182 days or more in that year; or
2. he is in India for 60 days or more in that year and for 365 days or more in the four preceding years.

If he meets neither, he is non-resident. The day of arrival and the day of departure both count as days in India. For an Indian citizen serving as crew on a foreign-bound ship leaving India, the days in India for that voyage are counted in the manner and on the conditions prescribed by rules (section 6(6)).

Exceptions to the 60-day condition (section 6(3)-(5))

1. A citizen of India who leaves India in the year for employment outside India, or to serve on the crew of an Indian ship (an Indian ship within the meaning of section 3(18) of the Merchant Shipping Act, 1958), is resident only if he stays 182 days or more (section 6(3)).
2. A citizen of India or person of Indian origin who lives outside India and comes on a visit is resident only if he stays 182 days or more (section 6(4)). But if his total income other than income from foreign sources exceeds ₹15 lakh, the 60 days become 120 days (section 6(5)), so 120 days in the year with 365 days in the four preceding years make him resident.

Deemed resident (section 6(7)-(8))

A citizen of India who is not liable to tax in another country or territory on the ground of his domicile, his residence or a similar criterion, and whose total income other than from foreign sources exceeds ₹15 lakh, is deemed resident in India, unless he is already resident under the rules above.

Step 2: Ordinarily or not ordinarily resident (section 6(13))

A resident individual is not ordinarily resident if any one of these applies:

1. he has been non-resident in 9 out of the 10 preceding tax years; or
2. he has been in India for 729 days or less in the 7 preceding tax years; or
3. he is a citizen or person of Indian origin with income other than from foreign sources above ₹15 lakh who is resident only by the 120-day rule (in India for 120 days or more but less than 182 days); or
4. he is a citizen deemed resident under section 6(7).

Otherwise he is resident and ordinarily resident. Income from foreign sources means income accruing outside India that is not deemed to accrue or arise in India, except income from a profession set up in India or a business controlled from India (section 6(14)).

Why status matters (section 5)

Income accruing outside India is not treated as received in India merely because it is shown in a balance sheet prepared in India (section 5(3)), and income already included because it accrued, or was deemed to accrue, is not included again when it is received, or deemed received, in India (section 5(4)).

Summary

Status is tested in two steps: first the day-count conditions (with the exceptions for citizens leaving India or visiting it, and the deemed-residence rule) decide whether the individual is resident; then the ten-year and seven-year tests decide whether a resident is ordinarily resident.