Resident and Ordinarily Resident
Also written ROR · Resident and Ordinarily Resident (ROR) · Resident and ordinarily resident in India
The residential status under which an individual's worldwide income is taxable in India — reached by being resident and failing both of the not-ordinarily-resident tests.
In plain language
Residential status decides the size of the net, and it has nothing to do with citizenship. An Indian passport holder can be a non-resident; a foreign national can be a Resident and Ordinarily Resident.
Getting to ROR takes two steps, in order:
- Are you resident? This is decided by the day-count tests in section 6.
- If resident, are you ordinarily resident? You are — unless you satisfy any one of the conditions that make you Not Ordinarily Resident.
Only an ROR pays Indian tax on income that has nothing to do with India.
How it works
Step 1 — resident? For an Indian citizen, the workbook lists the routes. The core ones: stay in India for 182 days or more in the previous year; or, if not visiting or leaving India, 60 days or more in the year and 365 days or more in the four preceding years. For a citizen or person of Indian origin visiting India, the 60-day test is relaxed to 182 days where Indian income is up to Rs 15 lakh, and to 120 days (with the 365-day condition) where Indian income exceeds Rs 15 lakh. For other foreign nationals, the plain 182-day test, or 60 days plus 365 days in four preceding years.
The deemed resident. Under section 6(1A), effective FY 2020-21, an Indian citizen whose Indian income exceeds Rs 15 lakh and who is not liable to tax in any other country by reason of domicile, residence or similar criteria is deemed resident regardless of his stay. Critically, a deemed resident is always treated as Resident but Not Ordinarily Resident — he can never be an ROR by this route.
Step 2 — ordinarily resident? A resident is Not Ordinarily Resident if he satisfies any one of:
- non-resident in India for at least 9 out of the 10 immediately preceding previous years; or
- in India for 729 days or less during the 7 immediately preceding previous years; or
- he became resident only by virtue of the deemed-resident clause.
Fail all three and he is Resident and Ordinarily Resident.
What ROR costs. Worldwide income. Income received or deemed received in India; income accruing or deemed to accrue in India; and income accruing or arising outside India — including from a business controlled from outside India or a profession set up outside India.
A worked example
Dr Menon returns to India on 1 April 2024 after 11 years in Dubai. In FY 2024-25 she is in India for 298 days, so she is resident on the 182-day test. She earns Rs 40,00,000 of Indian consultancy income and Rs 18,00,000 of rent on a Dubai apartment.
Test 1: non-resident in at least 9 of the 10 preceding years? She was non-resident in all 11. Satisfied — she is RNOR for FY 2024-25.
| FY 2024-25 as RNOR | Taxable in India |
|---|---|
| Indian consultancy Rs 40,00,000 | Yes |
| Dubai rent Rs 18,00,000 | No |
Fast forward to FY 2027-28, by which time she has been resident for four straight years. She is now non-resident in only 7 of the preceding 10 years — the first test fails. Her stay in the preceding 7 years exceeds 729 days — the second fails. She is not a deemed resident. She is therefore ROR.
| FY 2027-28 as ROR | Taxable in India |
|---|---|
| Indian consultancy Rs 40,00,000 | Yes |
| Dubai rent Rs 18,00,000 | Yes |
At a 30% slab plus cess, the same Dubai rent that cost her nothing in FY 2024-25 now costs about Rs 5,61,600 a year. Nothing about the apartment changed. Her day count did.
Why NISM asks about it
Chapter 7 (Concepts of Taxation), sections 7.4.1 to 7.5, and Table 7.1, which maps four kinds of income against the three statuses. Expect day-count questions with a table of stays across five years, a question on the deemed-resident rule and its Rs 15 lakh threshold, and at least one that asks which status taxes foreign income from a business controlled from outside India — only ROR.
Common exam traps
- Citizenship is irrelevant. The workbook says so in its first paragraph: a resident pays tax on worldwide income irrespective of citizenship.
- Not Ordinarily Resident needs only ONE of its conditions. Ordinarily resident needs all of them to fail.
- A deemed resident under section 6(1A) is always RNOR, never ROR — a trap the paper likes.
- The 120-day test needs Indian income above Rs 15 lakh AND 365 days in four preceding years. Quoting 120 days alone is wrong.
- RNOR is not the same as non-resident. RNOR is still taxed on foreign income derived from a business controlled from India or a profession set up in India; a non-resident is not.
- 729 days or less over 7 years, not per year.
- Residential status is determined afresh every previous year.
Check yourself
1.An individual who is a Resident but Not Ordinarily Resident earns interest on a bank deposit held abroad. How is it taxed in India?
- a)Taxable, because all residents are taxed on worldwide income
- b)Not taxable, because it is neither Indian income nor foreign income derived from a business controlled in or a profession set up in India
- c)Taxable at half the normal rate
- d)Taxable only if it exceeds Rs 15 lakh
Show the answer
Answer: (b) Not taxable, because it is neither Indian income nor foreign income derived from a business controlled in or a profession set up in India
An RNOR is taxed on Indian income and on foreign income only if it is derived from a business controlled from India or from a profession set up in India. Foreign bank interest meets neither test, so it is not taxable. The workbook makes exactly this point in its Mr A example: if Mr A were RNOR instead of ROR, the interest income from the USA bank account will not be taxed in India.
2.In the workbook's table, a corpus of Rs 1.18 crore at 12 per cent requires a monthly saving of Rs 3,376 if one starts at 30. What is the monthly saving required if one starts at 40 instead?
- a)Rs 4,500
- b)Rs 6,280
- c)Rs 11,928
- d)Rs 20,217
Show the answer
Answer: (c) Rs 11,928
The table gives Rs 3,376 starting at 30, Rs 6,280 starting at 35 and Rs 11,928 starting at 40 for the same Rs 1.18 crore corpus at 12 per cent. A ten-year delay multiplies the requirement by about three and a half. Rs 6,280 is the figure for a start at 35, and Rs 20,217 belongs to the separate Mr A example (Rs 2 crore in 20 years).
3.In the PMT function used to find the monthly saving needed for a retirement corpus, where is the retirement corpus entered?
- a)As the pv argument
- b)As the fv argument
- c)As the rate argument
- d)As the type argument
Show the answer
Answer: (b) As the fv argument
The corpus is the balance you want after the last payment is made, which is the definition of fv. In a PMT calculation that starts from nothing, pv is left blank. This is the mirror image of the PV calculation earlier in the chapter, where the payment is the input and the corpus is the answer — reversing pv and fv is the commonest error in these calculations.
Where this is taught
Free preparation for NISM Series X-BRelated terms
- Control and managementThe test that fixes a Hindu Undivided Family's residential status: a HUF is resident in India unless the control and management of its affairs is situated wholly outside India.
- Double Taxation Avoidance AgreementA treaty between two or more countries that prevents the same income being fully taxed twice, either by allocating the taxing right or by the residence country giving credit for tax paid at source.
- Non-ResidentAn assessee who fails every residency test in section 6 — taxable in India only on income received, accruing or deemed to accrue in India, and on nothing that arises abroad.
- Resident but Not Ordinarily ResidentA middle residential status for income tax: the person is a resident of India, yet foreign income unconnected with an Indian business or profession stays outside the Indian tax net.