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The residential status of a person is required to be determined for each financial year in order to determine the scope of total taxable income. There are three types of residential status under the law. They are 1) Resident 2) Resident but not ordinary resident [RNOR] and 3) Non-resident. Resident An individual is resident for tax purposes if s/he satisfies any one of the two conditions below: (a) S/he is in India for at least 182 days in the financial year, OR (b) S/he is in India for at least 60 days in the financial year and has been in India for a total of at least 365 days in the four preceding financial years combined. Exceptions: The law gives certain concessions for Indian citizens traveling or staying abroad. If an Indian citizen goes abroad for employment purposes, the period of 60 days will be substituted by 182 days. This relaxation is also extended to an Indian citizen who leaves India as a member of crew of an Indian ship. Therefore, s/he will be resident only if s/he is in India for at least 182 days in the financial year. Similarly, in the case of an Indian citizen or in the case of a non-resident Indian who lives abroad and comes on a visit to India, s/he will not be treated as resident unless s/he stays in India for at least 182 days in the financial year. In the case of an individual, we have to further see if residential status is `resident` and `not ordinarily resident [RNOR].` RNOR – A resident individual will be Not Ordinarily Resident if s/he further satisfies any one of the following conditions: (i) S/he is non-resident (as per basic conditions) in 9 out of 10 immediately preceding financial years OR (ii) S/he has been in India for a maximum period of 729 days in the 7 immediately preceding financial years. If the individual is resident but not ordinarily resident (RNOR), certain types of income will not be taxable in India. But, if s/he fails to satisfy the additional condition/s stated above, s/he will be resident and ordinarily resident (ROR) and will be taxed accordingly. Residential status of HUF A HUF is non-resident if its control and management in any financial year is wholly outside India. In all other situations, it is resident. A HUF also has to be categorized as ROR (ordinarily resident) or RNOR (not ordinarily resident). A HUF is RNOR if its Karta is not ordinarily resident, i.e. (i) S/he is non-resident (as per basic conditions) in 9 out of 10 immediately preceding financial years OR (ii) S/he has been in India for a maximum period of 729 days in the 7 immediately preceding financial years. |