CA Intermediate · Taxation

Residential Status and Scope of Total Income: formula sheet

Full chapter guide

Key formulas

Basic condition 1: Stay in India in the tax year ≥ 182 days; Satisfying this alone makes the individual resident.
Basic condition 2: Stay in the tax year ≥ 60 days AND stay in the 4 preceding tax years ≥ 365 days; Both limbs must be met. The days need not be continuous.
Relaxation: employment abroad or crew member: For an Indian citizen who leaves India in the tax year for employment outside India or as crew of an Indian ship: 60 days is replaced by 182 days; Condition 1 is unchanged. Only condition 2 is affected.
Relaxation: visit to India: For an Indian citizen or person of Indian origin living abroad who visits India: 60 days is replaced by 182 days if Indian-source total income is ₹15 lakh or less, and by 120 days if Indian-source total income exceeds ₹15 lakh; The replaced limit applies within basic condition 2, so check it before concluding on residence. The 365-day test in the four preceding tax years still applies. Such a person may be RNOR.
Counting days: Day of arrival and day of departure both count as days in India; Stay in Indian territorial waters also counts.
Additional conditions (for ROR status): Resident in India in at least 2 of the 10 preceding tax years AND stay ≥ 730 days in the 7 preceding tax years; The person must have been resident, not merely present, in those years. If both are met the person is ROR. If either fails the person is RNOR. A deemed resident citizen is RNOR without this test.
HUF, firm, AOP, BOI and other persons (not company): Resident if control and management is wholly or partly in India; Non-resident if wholly outside India; Tested for the relevant tax year. Partial control in India is enough for residence. The 182-day and 60-day tests are not used for these persons.
HUF: ROR test (applied to the karta/manager): ROR if karta was resident in at least 2 of the 10 preceding tax years AND stayed in India for at least 730 days in the 7 preceding tax years; Both conditions must be met. The karta's residence in the earlier years is judged by the individual day-count tests. If either condition fails, the resident HUF is RNOR. A non-resident HUF has no ROR/RNOR status.
Company: Resident if Indian company OR place of effective management (POEM) is in India in the tax year; Otherwise non-resident. No RNOR category for a company.
Place of effective management: Place where key management and commercial decisions for the business as a whole are, in substance, made; Substance matters over form. Where the board meets on paper is not decisive on its own.
Resident and ordinarily resident (ROR): Taxable = income received or deemed received in India + income accruing/arising or deemed to accrue/arise in India + income accruing/arising outside India; Global income. Foreign income is taxable even if it is never brought to India.
Resident but not ordinarily resident (RNOR): Taxable = received or deemed received in India + accruing/arising or deemed in India + foreign income only if from a business controlled in India or a profession set up in India; Other foreign income, such as foreign rent, interest or dividends received abroad, is not taxable.
Non-resident (NR): Taxable = income received or deemed received in India + income accruing/arising or deemed to accrue/arise in India; Foreign income received abroad is not taxable, even if the business is controlled from India or the profession is set up in India.
Overriding receipt rule: Income received in India = taxable for ROR, RNOR and NR; Place of accrual does not matter once the income is received or deemed received in India.
Remittance rule: Foreign income already received outside India, later remitted to India = not taxable again in India; Applies to NR and RNOR. Remitting money is not a fresh receipt. A resident is taxed on that income anyway as it accrued abroad.
Scope for a non-resident: Taxable = income received or deemed received in India + income accrued, arisen or deemed to accrue or arise in India; Income that is both received and accrues outside India is not taxable for a non-resident. For an RNOR, it is taxable only if it accrues or arises from a business controlled in India or a profession set up in India.
Place of receipt rule: First received in India → taxable. First received outside India (and accrues outside India) → not taxable for NR; not taxable for RNOR unless it accrues or arises from a business controlled in India or a profession set up in India; Later remittance to India of income already received abroad is not taxed again. For an RNOR, income from an Indian-controlled business or Indian-set-up profession is taxed because it accrues from that business or profession, not because it is remitted.
Business connection apportionment: Taxable business income in India = Total profit × share reasonably attributable to Indian operations; Use the ratio the question gives, such as sales, assets or expenses. Do not tax the whole profit.
Salary deemed to accrue in India: Salary for services rendered in India = taxable in India, wherever paid; Includes pay for a rest period or leave that falls between services rendered in India. Government salary to an Indian citizen for foreign service is also deemed Indian.
Dividend, interest, royalty and fees: Dividend by Indian company → India. Interest, royalty, technical fees paid by Government or resident → India, unless used for a business or profession carried on outside India or for earning income from a source outside India; Where the payer is a non-resident, the payment is deemed Indian only if it is used for a business or profession carried on in India, or for earning income from a source in India.
No business connection: Purchase of goods in India for export ≠ business connection; Operations confined to such purchase do not create deemed accrual of income in India.
ROR scope: ROR: income received or deemed received in India + income accruing or arising (or deemed) in India + income accruing or arising outside India; Worldwide income is taxable, wherever it is received.
RNOR scope: RNOR: Indian-source and India-received income + foreign income from a business controlled in India or a profession set up in India; Other foreign income received outside India is not taxable. Control wholly or partly in India is enough.
NR scope: NR: income received or deemed received in India + income accruing or arising (or deemed) in India; Foreign income both earned and received outside India is not taxable.
Earlier-year foreign receipt: Income received outside India in an earlier year and brought into India later = not taxable merely because of the remittance, unless taxable on another ground such as accrual in India; Remittance to India does not create a fresh receipt. Still test whether the income is taxable on another ground, such as Indian source.
Representative assessee (NR): NR's income may be assessed through a representative in India: an agent, a person with a business connection with the NR, a person through whom the NR receives income or from whom he derives income, or a person who holds the NR's property; the representative can recover the tax from the NR; The person must have had an opportunity of being heard before being treated as representative. The representative is assessed in respect of the NR's income, with a right of recovery from the NR.
Executor: Estate income is assessed in the executor's hands as representative, separately from the executor's own income; The executor's liability is limited to the estate's assets that he holds. State the rule in your answer without quoting a section number you are unsure of.

Quick revision

An individual is resident if in India for 182 days or more in the tax year, or for 60 days or more in the tax year and 365 days or more in the 4 preceding tax years.
The 60-day condition is replaced by 182 days for an Indian citizen who leaves India for employment abroad or as a crew member of an Indian ship. The 120-day rule does not apply to this case.
For an Indian citizen or person of Indian origin who comes on a visit to India, the 60-day condition is replaced by 182 days. If the India-source total income (excluding income from foreign sources) exceeds ₹15 lakh, the 60 days is replaced by 120 days instead.
If such a visitor has India-source total income (excluding income from foreign sources) above ₹15 lakh, stays 120 days or more but less than 182 days in the tax year, and has 365 days or more in the 4 preceding tax years, the person is resident but, under a specific provision of the section, is RNOR. You do not test this person for ROR.
An Indian citizen with India-source total income above ₹15 lakh (excluding foreign-source income) who is not liable to tax in any other country by reason of domicile or residence is a deemed resident. A deemed resident is treated as resident but not ordinarily resident under the deemed-resident rule. The rule applies only if the person is not otherwise resident under the basic conditions; if the person is already resident, ROR or RNOR follows the normal tests.
An individual is ROR only if resident in at least 2 of the 10 preceding tax years and in India for 730 days or more in the 7 preceding tax years.
An individual who is resident but fails either of those two ROR tests is RNOR.
A HUF, firm, AOP or other person is resident unless control and management is wholly outside India. A HUF is ROR only if its manager (karta) satisfies both ROR conditions, otherwise it is RNOR. RNOR is a sub-class of resident, so it is used only for individuals and HUFs. Firms, AOPs and other persons are only resident or non-resident; they are not classified as RNOR.
An Indian company is always resident; a foreign company is resident only if its place of effective management is in India in that tax year.
An ROR is taxed on worldwide income; an NR is taxed only on income received or deemed received in India and income accruing or deemed to accrue in India.
An RNOR is taxed on income received or deemed received in India, income accruing or arising (or deemed to accrue or arise) in India, and income from a business controlled in India or a profession set up in India, even if it accrues abroad.
Salary for services rendered in India is treated as earned in India, whatever the place of payment.
Apply the status test first, then the scope test. Income that accrued and was received outside India is not taxable for an NR merely because it is later remitted to India. For an RNOR, such income is taxable only if it comes from a business controlled in India or a profession set up in India.

Common mistakes

Applying the 60-day limit to an Indian citizen who left India for employment abroad in the tax year. Fix: Check citizenship and purpose of travel first. For these persons, the second condition needs 182 days, so a stay below 182 days means non-resident.
Applying 60 days, or the wrong limit, to a citizen or person of Indian origin who is visiting India. Fix: For such a visitor, use 182 days if Indian-source total income is ₹15 lakh or less and 120 days if it exceeds ₹15 lakh. The 365-day test in the four preceding tax years still applies.
Applying the 182-day or 60-day stay test to a firm, HUF or company. Fix: Day-count tests apply to individuals. For a HUF, they come in only indirectly, because the karta's residence history (the 2 of 10 years condition) is judged by those individual tests, along with the 730-day condition for the karta. Use control and management for non-companies and Indian company/POEM for companies.
Saying a firm is non-resident because most partners live abroad. Fix: If even part of control and management is in India, the firm is resident. Non-resident needs control wholly outside India.
Taxing foreign income received abroad for a non-resident because the business is controlled from India. Fix: The exception for a business controlled in India or a profession set up in India applies to the RNOR (and a ROR already pays on everything). A non-resident is not taxed on it.
Treating foreign income as taxable for an NR or RNOR when it is later remitted to India. Fix: If the income was already received outside India, bringing it in is not a new receipt. Do not tax it again.
Treating income paid abroad as not taxable in India. Fix: Always run both tests. Salary for Indian services and dividend from an Indian company are deemed to accrue in India wherever they are paid. Rent from a house in India actually accrues in India (and also falls under the property limb), so it is taxable wherever received.
Taxing the whole profit of a non-resident with a business connection. Fix: Only the portion reasonably attributable to Indian operations is deemed to accrue in India. Apply the given ratio.
Taxing all foreign income of an RNOR. Fix: Ask one question for every foreign item: is it from a business controlled in India or a profession set up in India? If yes, it is taxable. If no, and it is received abroad, it is not.
Excluding foreign business profit of an RNOR just because the business is located abroad. Fix: Control is about where the key decisions are taken. Control partly from India is enough. Read the facts for words like head office, board meetings or directions from India.

Exam tips

Look at who the person is in the first line: foreign citizen, or Indian citizen or person of Indian origin. This one fact decides whether a relaxation applies.
Show the day-count working in a small list, month by month, and say that both arrival and departure days are counted. Examiners give marks for this working.
Always state the tax year in the form 2026-27 and use the word 'tax year'. Do not write 'previous year' or 'assessment year', and do not cite 1961 Act section numbers.
If the question says 'determine residential status', go on to ROR or RNOR after the basic conditions, and write a clear one-line conclusion.
In MCQs, test the 182-day limit first and the limit for relaxation cases second. Many wrong options are built by applying 60 days where 182 should apply.
Always start your answer by naming the entity type. The test changes with the type, and examiners award marks for choosing the right test.
For company questions, scan the facts for 'Indian company' first. It settles the question immediately.
In HUF questions, check that the HUF is resident before testing the karta. Many students lose marks by skipping this.