How to Determine Residential Status: Income Tax Act, 2025

A person's residential status is one of the first things that must be determined before calculating taxable income in India. This is because the extent to which Indian income and foreign income become taxable can depend on whether the individual is a resident, resident but not ordinarily resident, or non-resident.

Residential status is determined separately for every tax year. Therefore, a person who qualifies as a resident in one year may become a non-resident in another year depending on the number of days spent in India and other prescribed conditions.

This article explains how an individual's residential status is determined under the Income-tax Act, 2025.

Categories of Residential Status

For income-tax purposes, an individual may fall into any of the following categories:

• Resident and Ordinarily Resident (ROR)
• Resident but Not Ordinarily Resident (RNOR)
• Non-Resident (NR)

In certain cases, an Indian citizen may also be treated as a deemed resident. A deemed resident is treated as a resident but not ordinarily resident.

The determination is therefore generally done in two stages:

1. Determine whether the individual is Resident or Non-Resident.
2. If the individual is resident, determine whether the person is ROR or RNOR.

Basic Conditions for Becoming Resident in India

Under section 6, an individual would generally qualify as a resident in India if either of the following conditions is satisfied.

Condition 1: Stay in India for 182 Days or More

An individual is treated as resident if the person's stay in India during the relevant tax year is 182 days or more.

Condition 2: 60 Days Plus 365 Days

An individual may also become resident where both the following conditions are satisfied:

• Stay in India for 60 days or more during the relevant tax year; and
• Stay in India for 365 days or more in aggregate during the four tax years immediately preceding that tax year.

Example

Suppose Aarav, a foreign citizen, stays in India for 110 days during Tax Year 2026-27. During the four preceding tax years, he had stayed in India for a total of 410 days.

He satisfies:

• More than 60 days in Tax Year 2026-27; and
• More than 365 days during the preceding four tax years.

Therefore, he would qualify as a resident under the second basic condition.

Indian Citizens Leaving India for Employment Abroad

A special rule applies to an Indian citizen who leaves India during the tax year for employment outside India.

For such a person, the normal 60-day condition is not applicable. The individual would generally become resident only if the stay in India during the relevant tax year is 182 days or more.

Example

Rohan, an Indian citizen, leaves India on 25 September 2026 to take up employment in Singapore. His total stay in India during Tax Year 2026-27 is 177 days.

Even if he had stayed in India for more than 365 days during the preceding four years, the normal 60-day test does not apply because he left India for employment abroad.

Since his stay during Tax Year 2026-27 is below 182 days, he would be treated as a non-resident.

Indian Citizens Leaving India as Crew Members of an Indian Ship

Similar treatment applies to an Indian citizen leaving India as a crew member of an Indian ship.

The second basic condition based on 60 days does not apply in such cases.

Special rules are also prescribed for determining the period of stay in India for a crew member undertaking an eligible foreign voyage. The period recorded in the Continuous Discharge Certificate between joining and signing off from an eligible voyage may have to be excluded while calculating the individual's stay in India.

Indian Citizens or Persons of Indian Origin Visiting India

Different rules apply where an Indian citizen or a Person of Indian Origin (PIO) residing outside India visits India during the tax year.

Where Income Other Than Income from Foreign Sources Does Not Exceed ₹15 Lakh

Where the individual's total income, other than income from foreign sources, does not exceed ₹15 lakh, the normal 60-day test does not apply.

Such a visitor would generally become resident only where the stay in India is 182 days or more during the tax year.

Example

Meera, a person of Indian origin residing in Canada, visits India for 145 days during Tax Year 2026-27.

Her total income other than income from foreign sources is ₹12 lakh.

Since the amount does not exceed ₹15 lakh, the 120-day rule discussed below does not apply. Her stay is also below 182 days.

She would therefore be a non-resident.

Special 120-Day Rule Where Income Exceeds ₹15 Lakh

A modified rule applies where:

• The person is an Indian citizen or Person of Indian Origin residing outside India;
• The person comes to India on a visit; and
• Total income, other than income from foreign sources, exceeds ₹15 lakh during the tax year.

In this situation, the normal requirement of 60 days is replaced by 120 days.

Accordingly, the person may become resident where:

• Stay in India during the relevant tax year is 120 days or more; and
• Stay during the four preceding tax years is 365 days or more.

Where residency arises under this modified 120-day provision and the stay during the year is less than 182 days, the individual is treated as Resident but Not Ordinarily Resident (RNOR).

Example

Kabir, an Indian citizen living in Dubai, visits India for 135 days during Tax Year 2026-27.

His stay in India during the preceding four years totals 390 days. His income other than income from foreign sources is ₹22 lakh.

Since:

• His income exceeds ₹15 lakh;
• He stayed in India for more than 120 days; and
• His stay during the preceding four years exceeds 365 days,

he would qualify as a resident.

Since his stay is between 120 days and 182 days under this special provision, his status would be Resident but Not Ordinarily Resident (RNOR).

Who Is a Person of Indian Origin?

For this purpose, an individual is considered a Person of Indian Origin if:

• The individual; or
• Either parent; or
• Any grandparent

was born in undivided India.

What Is Income from Foreign Sources?

For applying the ₹15 lakh threshold, the meaning of foreign-source income is important.

Income from foreign sources broadly refers to income that:

• Accrues or arises outside India; and
• Is not deemed to accrue or arise in India.

However, income derived from a business controlled in India or a profession set up in India is excluded from the meaning of income from foreign sources for this purpose.

Deemed Resident of India

An Indian citizen may, in certain circumstances, be treated as resident even without satisfying the normal number-of-days tests.

Under the deemed residency provision, an individual may be treated as resident where all the prescribed conditions are satisfied, including:

• The individual is an Indian citizen;
• Total income, other than income from foreign sources, exceeds ₹15 lakh during the tax year; and
• The individual is not liable to tax in any other country or territory by reason of domicile, residence or another similar criterion.

This provision does not apply where the individual is already resident in India under the normal residential-status provisions.

A person who becomes resident under the deemed residency provision is treated as Resident but Not Ordinarily Resident.

Meaning of “Liable to Tax”

For the deemed residency provision, being “liable to tax” does not necessarily mean that tax must actually have been paid.

A person is liable to tax in a country where an income-tax liability exists under the law of that country. It may also include a person who is subsequently exempted from such liability under that country's law.

How to Determine ROR or RNOR

Once an individual qualifies as resident, the next step is to determine whether the person is:

• Resident and Ordinarily Resident (ROR); or
• Resident but Not Ordinarily Resident (RNOR).

For the general test, an individual would be Resident and Ordinarily Resident where both of the following conditions are satisfied:

1. The individual was resident in India in at least 2 out of the 10 tax years immediately preceding the relevant tax year; and
2. The individual stayed in India for 730 days or more during the 7 tax years immediately preceding the relevant tax year.

If the required conditions are not satisfied, the resident individual would generally be treated as RNOR.

In corresponding terms, an individual can be RNOR where the person:

• Was non-resident in India in 9 out of the 10 preceding tax years; or
• Stayed in India for 729 days or less during the preceding 7 tax years.

Certain individuals covered by the 120-day rule and deemed residency provisions are specifically treated as RNOR.

Quick Residential Status Guide

Important Points While Counting Days in India

• Stay in India need not be continuous.
• The individual does not have to stay at one particular location.
• Both the date of arrival and date of departure are counted while determining the period of stay.
• Stay within India's territorial waters may also be relevant.
• Citizenship and income-tax residential status are separate concepts.

An Indian citizen can therefore be non-resident for income-tax purposes, while a foreign citizen may become resident in India if the applicable conditions are satisfied.

Why Residential Status Matters

Residential status affects the scope of income that can be taxed in India.

• An ROR may be taxable in India on global income.
• An RNOR is subject to a more limited scope of taxation for certain foreign income.
• A non-resident is generally taxable in India on income received or deemed to be received in India and income accruing, arising or deemed to accrue or arise in India.

Therefore, residential status should be determined before deciding whether a particular foreign salary, business income, investment income, rent or capital gain forms part of taxable income in India.

Conclusion

Residential status is determined primarily by the individual's physical presence in India, but the rules vary for Indian citizens leaving India, overseas Indians visiting India, persons with income exceeding ₹15 lakh and Indian citizens who are not liable to tax in another country.

The most important points are to:

• Count the number of days spent in India accurately;
• Review the individual's stay during earlier tax years;
• Check whether the ₹15 lakh threshold applies;
• Identify whether the person is an Indian citizen or PIO;
• Examine whether the deemed residency provision applies; and
• After establishing residency, determine whether the individual is ROR or RNOR.

Since residential status has a direct impact on the taxation of Indian as well as foreign income, it should be established carefully for each tax year separately.
 

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