Residential Status Under the Income-tax Act for AY 2025-26

Residential status is the gateway provision that determines how much of an assessee’s income will be brought to tax in India. It is not linked to citizenship or visa status, but to stay in India or location of control/management, and it is examined independently for every financial year.

This guide explains, in a structured and practical way, how residential status is determined for:

Individuals (including Indian citizens, Persons of Indian Origin, employees leaving India, ship crew, etc.)
Hindu Undivided Families (HUFs)
Companies (Indian and foreign; including POEM rules)
Firms, AOPs, BOIs, local authorities and other artificial juridical persons

It also sets out the tax implications attached to each category under Section 6 of the Income Tax Act 1961 and corresponding Rule 126 of the Income-tax Rules 1962.

1. Why Residential Status Matters

The income-tax liability of an assessee in India is computed on the basis of total income. However, what exactly is included in “total income” depends directly on the assessee’s residential status in the relevant previous year.

Once residential status is determined for that year, it applies uniformly to all sources of income for that assessee for that year. As per Section 6(5), if an assessee is resident in respect of any one source, he is deemed resident for all sources in that previous year.

2. Categories of Residential Status

Under the Income Tax Act 1961, residential status can broadly be grouped as follows:

2.1 For Individuals and HUFs

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

2.2 For Other Persons

Resident
Non-Resident

Note: Entities other than individuals and HUFs cannot be classified as “Not Ordinarily Resident” except in cases specifically covered in Section 6(6) (HUFs through status of Karta).

3. Scope of Taxable Income Based on Residential Status

3.1 Resident and Ordinarily Resident (ROR)

An assessee who is Resident and Ordinarily Resident in India is taxed on:

Income received or deemed to be received in India in the previous year
Income that accrues or arises or is deemed to accrue or arise in India during the year
Income that accrues or arises outside India (i.e., global income)

Thus, an ROR is subject to tax in India on worldwide income.

3.2 Resident but Not Ordinarily Resident (RNOR)

An assessee with RNOR status is liable to tax on:

Income received or deemed to be received in India
Income accruing or arising or deemed to accrue or arise in India
Income accruing or arising outside India only if it is:
- Derived from a business controlled from India, or
- Arising from a profession set up in India

Any other foreign-sourced income that does not fall in the above two categories is not taxed in India for an RNOR.

3.3 Non-Resident (NR)

A Non-Resident is taxed only on:

Income received or deemed to be received in India, and
Income accruing or arising or deemed to accrue or arise in India

Foreign income that accrues or arises outside India and is not deemed to accrue or arise in India remains outside the Indian tax net for Non-Residents.

4. Residential Status of Individuals

4.1 Basic Conditions for Being Resident (`Section 6(1)`)

An individual is treated as resident in India in a previous year if any one of the following conditions is satisfied:

Stay in India is 182 days or more during the relevant financial year; or
Stay in India is 60 days or more during that year and stay in India is 365 days or more during the 4 immediately preceding previous years.

If neither of the above conditions is satisfied (after applying applicable exceptions), the individual becomes a Non-Resident for that year.

4.2 Special Relaxations for Certain Individuals (Explanation 1 to `Section 6(1)`)

The 60-day test is extended to 182 days or 120 days in certain cases as under:

4.2.1 Indian Citizens Leaving India for Employment or as Ship Crew

For an individual who is:

An Indian citizen leaving India during the year for the purpose of employment outside India, or
An Indian citizen leaving India as a member of the crew of an Indian ship (as defined in the Merchant Shipping Act 1958),

the 60-day period in Section 6(1)(c) is substituted with 182 days.

Thus, such individuals are resident only if their stay in India is 182 days or more in that financial year.

4.2.2 Indian Citizens or Persons of Indian Origin Visiting India