How Residential Status is determined in case of NRIs
by Abhinav K. Digital Marketing Expert, Freelance
Residential status is an important criterion to understand the liability of NRI to pay taxes in India as well as liability for NRI Income Tax return filing.
per the provisions of the Income Tax Act, the taxability of income also
depends upon the residential status of any individual. As a general
the case of Residents, their global income becomes taxable in India.
Therefore, in case any Resident has also earned income outside India
during any previous year, He might have paid tax in that country since
the source of such income was outside India. Also, He would be liable to
pay taxes in India since he was Resident in India. In such a case,
there would be double taxation. However, He would be entitled to claim
proportionate credit of taxes paid outside India while filling his
Indian Tax Return.
the case of Non-Residents, only income which has been accrued in India
or deemed to accrue in India or received or deemed to be received in
India is taxable in India. Therefore, income which has accrued outside
India or received outside will not be taxable in India, and no need to
show such income during NRI Income Tax return filing.
the case of Residents but not ordinary Residents (RNOR), only income
which has been accrued in India or deemed to accrue in India or received
or deemed to be received in India is taxable in India. Further, Income
which accrues or arises outside India from a business controlled in
India or a profession or business set up in India would be taxable in India.
is because of aforesaid reason, it is important to determine
residential status since it will help in determining tax liability as
well as liability for filing Income Tax Return by NRI.
Determining Residential Status of Person
To be qualified as a Resident of India, an individual must fulfill these two conditions as follows-
- He/she has stayed in India for more than 182 days during a particular financial year. OR
has stayed in India for 60 days or more in total during a particular
financial year. Also, they have stayed in India for 365 days or more for
four years preceding the financial year.
case none of the conditions stated above is satisfied then, the
individual is categorized as a Non-Resident Indian (NRI). Also, it is to
be noted that if any Indian citizen or a Person of Indian Origin (PIO)
is visiting India and their total income during that particular
financial year from all the Indian sources exceeds Rs. 15 Lakhs, then
the above mentioned period of 60 days is to be read as 120 days in
total. In other scenarios, it will be taken as 180 days in total.
Any person, who is Not Resident in India as per aforesaid conditions, will become Non-Resident Indian.
RESIDENT BUT NOT ORDINARY RESIDENT (RNOR)
To be categorized as a Resident and Ordinarily Resident (ROR), a person shall fulfill the following conditions-
(a) He must have been a non-resident in India in 9 out of 10 previous financial years preceding that year,
(b) His period of stay in India during the last 7 previous years preceding that year has been for 729 days or less.
due to recent amendment, an individual will be treated as resident but
not ordinarily Resident if taxable income exceeds Rs 15 lakh and stays
in India for 120 days or more (but less than 182 days) and is treated as
a resident individual. Income Tax Return Filing
When should NRIs file their Income Tax Return (ITR) in India?
NRI Tax return becomes compulsory in the following situations:
- When NRI has income from India which exceeds Rs 2.5 lac.
- When there is a refund receivable.
- In the case of the sale of shares and assets, if there is a capital gain or loss transaction.
- When NRI wants to carry forward losses from the sale of shares or business.
Created on Sep 20th 2021 03:05. Viewed 115 times.