Taxability of your income depends on status of residency

Residential Status is the basis of Individual taxability in India. The residential status is determined based on the physical stay of an individual in the relevant financial year as well as preceding ten tax years. This is more relevant if you are an Indian working overseas or having income/income earning assets outside India. RESIDENTIAL STATUS -As per Income Tax Act, you can be one of the following:

  • Non-resident
  • Ordinary resident
  • Not an ordinary resident in India.(NRI)

Residents and Non-Resident Concepts According to the current test of residence, an individual becomes a resident, if he: a)is in India for 182 days or more during the previous year; or b)Has been in India for at least 365 days within the preceding four years and for at least 60 days in the relevant previous year. In other situations the person is to be treated as Non­-resident. “Not Ordinarily Resident” Definition Apart from “resident” and “non-resident”, a third category of residential status also exists, namely, “not ordinarily resident (NRI)”. That is to say a person may well qualify as a resident by the criterion lay out above, but yet qualify as “not ordinarily resident in India”. In that event, his income accruing or arising abroad will not form part of his total income, unless it is derived from a business controlled in or a profession set up in India. A person is not ordinarily resident in India, if

  1. He has not been a resident in nine out of the ten previous years, or
  2. Has not been in India for 730 days or more during the preceding seven years

Taxability in India In the case of a resident, the scope of total income includes all incomes of the previous year earned by the tax payer, regardless of where these incomes accrued, arose or were received. On the other hand in the case of a non-resident, or a person who is “resident but not ordinarily resident”, only the following incomes earned by him are includible in his total income:

  1. incomes  which accrued or  arose  to  him  in  India during the previous year or which are deemed to have so accrued or arisen or;
  2. Incomes which were received in India during the previous year or which are deemed to have been so received.
  3. Incomes which accrued or arose to him outside India if derived from a business controlled in, or a profession set up in India (applicable only in the case of a person who is resident but not ordinarily resident).


  • It is important to make sure that the person being assessed belongs to a particular country during particular period and is not able to evade the tax.
  • Tax incidence or Tax burden on an assessee depends on his residential status.
  • The residential status is determined with the each source of Income and if a person is resident for one source of income he will have the same status for all the sources of income for that particular PY.
  • A person may have different residential status for different previous year say he may be resident for previous year 2010-11 and he may be nonresident for previous year 2011-12 but for a single previous year he can have only one status.
  • For counting the number of days of stay in India, your day of entry / departure should be counted as stay in India.
  • Residential status and citizenship is not the same thing. You may be an Indian Citizen but a non-resident in India. It is also possible that a foreign citizen is resident / non-resident in India for tax purposes.
  • You can be resident of more than one country (as per the tax laws of the respective countries) at the same time.

Timely and efficient tax planning go long way in lowering your total taxes by employing and taking advantages of in-built provisions of tax exemptions, deductions, concessions, rebates, reliefs, allowances and other benefits granted by the tax laws so that the incidence of tax is reduced. We at have the expertise to guide you in lowering your tax outgo and thus enhancing your total take away.  We at provide full year support solving all your tax issues, in addition to filing of your return of income with excellent tax planning. Please join us now in pursuit of simplifying individual taxation! Alok Patnia Founder and Director at

One thought on “Taxability of your income depends on status of residency”

  1. that as per new CBDT rules,a salaried emoplyee whose total income is less than rs.5lakh need not submit his IT return.1. But then how will the tax payable be determined?2. If it is determined on the basis of TDS certificates, won’t the tax be lesser as the TDS rates are less ?

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