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Unit 2: Residential Status and Taxation

Notes

Notes

a. The term “stay in India” includes stay in the territorial waters of India (i.e. 12
nautical miles into the sea from the Indian coastline). Even the stay in a ship or boat
moored in the territorial waters of India would be sufficient to make the individual
resident in India.
b. It is not necessary that the period of stay must be continuous or active nor is it
essential that the stay should be at the usual place of residence, business or
employment of the individual.
c. For the purpose of counting the number of days stayed in India, both the date of
departure as well as the date of arrival are considered to be in India.

d. The residence of an individual for income-tax purpose has nothing to do with
citizenship, place of birth or domicile. An individual can, therefore, be resident in
more countries than one even though he can have only one domicile.

Exceptions:
The following categories of individuals will be treated as residents only if the period of their
stay during the relevant previous year amounts to 182 days. In other words even if such persons
were in India for 365 days during the 4 preceding years and 60 days in the relevant previous
year, they will not be treated as resident.
1. Indian citizens, who leave India in any previous year as a member of the crew of an Indian
ship or for purposes of employment outside India, or
2. Indian citizen or person of Indian origin engaged outside India in an employment or a
business or profession or in any other vocation, who comes on a visit to India in any
previous year

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Caution A person is said to be of Indian origin if he or either of his parents or either of his
grandparents were born in undivided India.
Not-ordinarily resident: Only individuals and HUF can be resident but not ordinarily resident
in India. All other classes of assesses can be either a resident or non-resident. A not-
ordinarily resident person is one who satisfies any one of the conditions specified under
section 6(6).
(i) If such individual has been non-resident in India in any 9 out of the 10 previous
years preceding the relevant previous year, or
(ii) If such individual has during the 7 previous years preceding the relevant previous
year been in India for a period of 729 days or less.

Therefore in simpler terms, an individual is said to be a resident and ordinarily resident
if he satisfies both the following conditions:
(i) He is a resident in any 2 out of the last 10 years preceding the relevant previous year,
and
(ii) His total stay in India in the last 7 years preceding the relevant previous year is
730 days or more.

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