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What are the Different Types of Residential Status Under Income Tax Act ?

Residential status of a person plays a vital role in the purpose of the levy of income tax because the Income Tax department takes the tax based on the residential status of the person. If a person is a citizen of India but at the end of the day, he can be a non-resident for a financial year.

This can be also a vice versa like a foreigner can be a citizen of that particular country and if he is living in India for a particular time period and that time period is fulfilling the criteria for the Resident of India then he can be taxable in India.

Why Residential Status is Important?

We are living in such a society where we don’t like the concept of sharing. We only think about the individual while we should think of society for the large.

That’s why we try all possibilities to not share own hard money to the government. However, it is a very important duty to pay the tax for the growth of the nation. Because the money which we are paying in the form of tax that is directly or indirectly connected to our own development.

At the time of filing of tax return, the residential status of the individual is very important. Because the Income Tax Department calculate tax according to the residential status of the individual.

Residential Status of the individual, company, a firm is necessary because they are commencing their business in India and for their business, they are using the resources of the particular country and while using the resources they are earning money. So Residential status of the particular person plays an important role while at the time of paying taxes.

Classification of Residential Status

As per the depending stay of the individual in India, Income Tax Law has classified the residential status into three categories.

Residential status of an individual will cover the financial year of an individual and as well as his/her previous years of stay.

The following categories which classified residential status of company.

Resident (ROR)
Resident but Not Ordinarily Resident (RNOR)
Non Resident (NR)
1. Resident and Ordinarily Resident (ROR)
Under Section 6(1) of the Income Tax Act an Individual is said to be resident in India if he fulfils the condition:

If he/she stay in India for a period of 182 days or more in a financial year, or He/ She is in India for a period of 60 days or more in a financial year and If he/she stays in India for a period of 365 days or more during the 4 years immediately preceding the previous year.

As per section 6(6) of Income Tax Act, 1961 there are following two conditions when an individual will be treated as the “Resident and Ordinarily Resident” (ROR in India.

If He/ She stays in India for a period of 730 days or more during the 7 years of preceding previous year.
If He/ She stays in India for at least 2 out of 10 previous financial years which is preceding the previous years.
If the individual doesn’t satisfy either of the condition, then he is no eligible to qualify as Resident and Ordinarily Resident (ROR).