Residential status
Also written Tax residency status
The classification — resident (ordinarily or not ordinarily), deemed resident or non-resident — that decides which income is taxable in India. Citizenship alone is not the test.
In plain language
An assessee's income-tax liability is calculated on total income, and what goes into total income depends greatly on residential status in India. In the workbook's words, citizenship is of no consequence to that question.
- A resident is taxed in India on total world income.
- A citizen of India who is non-resident during the year is taxed only on Indian income.
Total income cannot be computed until residential status is determined.
For an individual, status earlier depended only on the period of stay in India. With effect from Assessment Year 2021-22, it depends on citizenship, period of stay and total income from Indian sources.
How it works
Individuals (Chapter 10, section 10.1.1.1). Four categories: ordinarily resident, resident but not ordinarily resident (RNOR), deemed resident, non-resident.
Resident if in India for:
- 182 days or more in the previous year; or
- 60 days or more in the previous year and 365 days or more in the preceding 4 years.
Exceptions to the 60-day rule:
| Who | 60 days becomes |
|---|---|
| Citizen/PIO visiting India with Indian income below ₹15 lakh; citizen leaving for employment; citizen leaving as crew of an Indian ship | 182 days |
| Citizen/PIO with Indian income above ₹15 lakh | 120 days (then treated as not ordinarily resident) |
Deemed resident (Section 6(1A)): an Indian citizen with Indian income above ₹15 lakh who is not liable to tax in any other country by reason of domicile or residence — regardless of days of stay. Always not ordinarily resident. Does not apply to someone already resident.
Not ordinarily resident if any one of: non-resident in 9 of the 10 preceding years; in India 729 days or less in the preceding 7 years; the ₹15 lakh / 120–181 days case; or deemed resident. Otherwise ordinarily resident.
Others. HUF: resident unless control and management is wholly outside India. Indian company: always resident. Foreign company: resident if its place of effective management (POEM) is in India. Firm, AOP, BOI: resident if any part of control and management is in India.
Scope of total income (section 10.1.3):
| Income | ROR | RNOR | NR |
|---|---|---|---|
| Received or deemed received in India | Taxable | Taxable | Taxable |
| Accrues or arises (or deemed) in India | Taxable | Taxable | Taxable |
| Accrues outside India from a business controlled in / profession set up in India | Taxable | Taxable | Not taxable |
| Other income accruing outside India | Taxable | Not taxable | Not taxable |
A worked example
Illustrative figures. Three Indian citizens in the same previous year. None is liable to tax in another country unless stated.
1. Arvind works in Dubai (pays no tax there). He visits India for 40 days. Indian income (rent, interest): ₹18 lakh. He fails every stay test, but as a citizen with Indian income above ₹15 lakh and not liable to tax elsewhere, he is a deemed resident — not ordinarily resident. His ₹18 lakh Indian income is taxable; his Dubai salary, being income accruing outside India from a job not controlled from India, is not.
2. Neha returns after 12 years abroad and stays 200 days. She is resident (200 ≥ 182). She was non-resident for 9 of the last 10 years, so she is RNOR. Her US dividend income of ₹4 lakh is not taxable in India this year.
3. Kabir has lived in India throughout. He is resident and ordinarily resident. His Indian income and his ₹4 lakh of US dividends are both taxable in India.
Same US dividend, three different answers — decided by residential status, not citizenship.
Why NISM asks about it
Chapter 10 (Taxation), section 10.1.1, covers residential status for individuals, HUFs, companies and other persons; section 10.1.2 covers POEM; section 10.1.3 the scope of total income by status. For a portfolio manager with NRI and returning-Indian clients, the status decides what the client's PMS income is taxed on.
Common exam traps
- Citizenship is not the test for taxability — residential status is. (Citizenship does matter within some conditions, such as deemed residency.)
- A deemed resident is always not ordinarily resident, and the deemed-resident rule does not apply to someone already resident.
- The 120-day rule applies only where Indian income exceeds ₹15 lakh; below ₹15 lakh, a visiting citizen/PIO gets 182 days.
- The workbook's wording is loose in one place: after the 120-day exception it says the individual is "deemed as Not Ordinarily Resident"; the NOR list clarifies that such a person is resident, but not ordinarily resident. It is not the same as a deemed resident under Section 6(1A).
- An Indian company can never be non-resident.
- A firm, AOP or BOI is resident if even part of its control and management is in India — a single decision taken in India can be enough.
- Stale reference. The workbook cites sections of the Income-tax Act, 1961. The Income-tax Act, 2025 has replaced it with effect from 1 April 2026, renumbering provisions and replacing the "previous year" with the "tax year". Learn the workbook's rules and section numbers for the exam, and check the new Act's numbering in practice.
Where this is taught
- Series XXI-B · Chapter 10: Taxationintroduced here
- Series X-B · Chapter 7: Concepts of Taxationintroduced here
Related terms
- Deemed resident (Section 6(1A))An Indian citizen treated as resident purely because Indian income exceeds Rs 15 lakh and no other country taxes them by domicile or residence — regardless of how many days they actually spent in India.
- 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.
- Previous yearUnder the Income Tax Act, 1961, the year in which income is earned. It is taxed in the following assessment year; each runs from 1 April to 31 March.
- Resident and Ordinarily ResidentThe 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.
- 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.
- Non-Resident IndianAn Indian citizen or person of Indian origin who does not meet the resident conditions. NRIs may invest in PMS through NRE or NRO accounts and are taxed only on Indian income.
- Place of Effective ManagementThe tax-residency test that can treat an offshore fund as an Indian tax resident if its real decision-making is found to happen in India — a risk offshore AIF structures manage through their local advisory offices.
- Eligible fund managerAn India-based, SEBI-registered fund manager meeting Section 9A conditions, who manages money for overseas "eligible investment funds" without making those funds taxable as Indian residents.
- Indian incomeThe Income-tax Act's shorthand for total income excluding income from foreign sources — the figure tested against Rs 15 lakh in the deemed resident and 120-day residence rules.
- Section 115BAC regimeThe tax regime that applies by default under Section 115BAC(1A) unless the taxpayer opts out under Section 115BAC(6) — and which caps the surcharge at 25% instead of 37%.
- Section 80M deductionA deduction that stops the same dividend being taxed twice in a corporate chain: an Indian company that receives dividend from another Indian company and passes it on in time can deduct what it received.
- Tax yearUnder the Income Tax Act, 2025, the 12-month financial year beginning 1 April — or, for a newly set-up business or profession, the period from set-up to the end of that financial year.
- Person resident in IndiaFEMA's definition of residence under section 2(v) — broadly a person normally residing in India for more than 182 days in the preceding financial year, plus Indian-registered bodies and certain offices.
- 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.
- 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.