An individual is said to be a resident in the tax year if one is:
- physically present in India for a period of 182 days or more in the tax year (182 days rule), or
- physically present in India for a period of 60 days or more during the relevant tax year and 365 days or more in aggregate in four preceding tax years (60 days rule).
If none of the above two conditions are met, the individual is said to be an NR in India in that tax year.
- If Mr. A comes to India on or before 30 September, he will be treated as resident for that tax year.
- If Mr. B comes to India on or before 31 January and stayed in the country for 365 days or more during the four tax years preceding the relevant tax year, he will be treated as resident for that tax year.
A resident individual is treated as RNOR in India if one satisfies any one of the following conditions:
- One has been NR of India in nine out of ten tax years preceding the tax year for which residential status is being determined.
- One's physical presence in India is less than or equal to 729 days during seven tax years preceding the tax year for which residential status is being determined.
A resident individual not satisfying both of the above conditions is treated as ROR.
If an expatriate stays in India for say 300 days for each of the three tax years, then one will not qualify as RNOR in the fourth year because of the following reasons:
- one is not an NR in nine out of ten tax years, and
- one's physical presence in India exceeds 729 days in the preceding seven tax years.
In determining the physical presence of individuals in India, it is not essential that their stay in the country needs to be continuous or at the same place.
Furthermore, their date of arrival in India and date of departure from it are considered as their period of stay in the country. The purpose of their residence in India is irrelevant, and even if it is for a visit to their families or tourism, it is counted as a stay in India for residency purposes.
In effect, a newcomer to India normally remains NR/RNOR for the first two to three tax years of stay in India. The rules are slightly more liberal for a person who is of Indian origin, an Indian citizen residing abroad and visiting India, or an Indian citizen who leaves India for employment abroad. In such cases, only the ’182 days rule’ is applicable to determine their residency in India.