Residential Status for Income Tax

Residential status refers to a person's status with reference to the question of how long the person has stayed in India for the past five years. The income tax liability of a taxpayer is based on the residential status in the financial year, and four years preceding the financial year. Also, while

, the taxpayer must declare the applicable residential status in the tax return. Under the Income Tax Act, taxpayers are divided into three categories of residential status, namely:

• Resident but not ordinarily resident.
• Ordinarily resident.
• Non-resident.

Resident but Not Ordinarily Resident

An individual is a resident but not ordinarily resident in India in any financial year if the assessee fulfils any one of the following two conditions:

1. The taxpayer is in India in a particular financial year for 182 days or more, or
2. The taxpayer has been in India for at least 365 days in the four years immediately preceding a particular financial year and is in India for 182 days or more in that year.

Ordinary Resident

A person is said to be “not ordinarily resident” in India in any financial year if the person is-

1. An individual who has been a non-resident in India in nine out of the ten previous years preceding a particular financial year, or has during the seven financial years preceding that year been in India for a period of, or periods amounting in all to, seven hundred and twenty-nine days or less; or
2. Hindu Undivided Family (HUF) whose manager has been a non-resident in India in nine out of the ten financial years preceding the relevant financial year or has during the seven financial years preceding that year in India for a period of, or periods amounting in all to, seven hundred and twenty-nine days or less. Thus, an “ordinary resident” would be a resident who is outside the purview of the above definition.

Non-Resident

An individual is non-resident in India in any financial year if the taxpayer does not fulfil any of the above-mentioned conditions required for a resident but not ordinarily resident and an ordinary resident. To know more about the concept of slump sale in Income Tax, click

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