Assessment of Individuals including Non-residents: formula sheet

Key formulas

Basic conditions (resident if either is met)

(a) 182 days or more in India in the tax year; OR (b) 60 days or more in the tax year AND 365 days or more in the 4 preceding tax years

If neither is met, the individual is a non-resident. Day of arrival and day of departure are both counted.

Exception to the 60-day condition: employment or crew

Indian citizen who leaves India in the tax year for employment outside India, or as crew member of an Indian ship: the 60 days in condition (b) is replaced by 182 days, so in effect only the 182-day test applies

The same replacement applies to an Indian citizen or person of Indian origin who, being outside India, comes on a visit to India in the tax year: 60 days is replaced by 182 days. The 120-day rule below applies only to this visit case, not to employment or crew.

Visit by high-income citizen or person of Indian origin

Citizen or person of Indian origin who, being outside India, comes on a visit, and whose total income other than foreign-source income exceeds ₹15,00,000: 60 days is replaced by 120 days (365 days in the 4 preceding years still required)

Such a person who is in India for 120 days or more but less than 182 days is resident but RNOR, by a specific statutory provision for this case. The 2-year and 729-day conditions are not needed to reach that result.

Additional conditions: ROR

Resident AND resident in at least 2 of the 10 preceding tax years AND in India for more than 729 days in the 7 preceding tax years

Both conditions must be met to be ROR.

RNOR

Resident AND (non-resident in 9 or 10 of the 10 preceding tax years, i.e. resident in fewer than 2 of them; OR in India for 729 days or less in the 7 preceding tax years)

Failing either of the two additional conditions makes the resident an RNOR.

Deemed resident

Indian citizen, total income other than foreign-source income exceeds ₹15,00,000, and not liable to tax in any other country by reason of domicile or residence: deemed resident in India

A deemed resident is treated as RNOR. Apply this only when the person is not already resident under the basic conditions.

Resident and ordinarily resident (ROR)

Taxable = income received or deemed received in India + income accruing or deemed to accrue in India + income accruing outside India (even if not received in India)

Global income is taxable. Foreign income already taxed abroad may qualify for relief, which is a separate topic.

Resident but not ordinarily resident (NOR)

Taxable = income received or deemed received in India + income accruing or deemed to accrue in India + foreign income only if derived from a business controlled in India or a profession set up in India

Foreign income such as foreign rent or foreign interest, received abroad and not from such a business or profession, is not taxable.

Non-resident (NR)

Taxable = income received or deemed received in India + income accruing or deemed to accrue in India

Foreign income received abroad is outside the scope of tax.

Deemed accrual: dividend

Dividend paid by an Indian company outside India = deemed to accrue in India (section 9(4))

Place of payment does not matter. The payer's Indian residence does.

Deemed accrual: interest, royalty, fees for technical services

Deemed to accrue in India if payable by the Government, by a resident (unless used for business or income outside India), or by a non-resident (if used for business or income in India) (section 9(5) to (7))

Section 9(11) applies this whether or not the non-resident has a residence, place of business or business connection in India, or rendered services in India.

Deemed accrual: salary

Salary is deemed to accrue in India if earned in India (services rendered in India, or rest or leave period preceded and succeeded by such services), or if the Government pays an Indian citizen for services rendered outside India (section 9(3))

Salary for services abroad paid by a private employer is not covered by this rule.

Indirect transfer of shares

Foreign company or entity shares are deemed situated in India if the Indian assets exceed ₹10 crore and represent at least 50% of all assets (section 9(10))

Valued at fair market value on the specified date, without reducing liabilities. Certain small holders and Category I or II FPIs are excluded.

Investment income of an NRI

Investment income = gross receipts, with no deduction for any expenditure or allowance

Section 213(1). Applies to the investment income itself, whatever the provision under which a deduction is claimed.

Only investment income / LTCG

GTI consists only of investment income and/or LTCG ⇒ Chapter VIII deduction = Nil

Section 213(2)(a). Both parts must be checked: if any other income exists, this rule does not apply.

Mixed income

Reduced GTI = GTI − (investment income + LTCG); Chapter VIII deduction is allowed on Reduced GTI only

Section 213(2)(b). Deductions are limited to the reduced figure under the general cap in section 122(2).

Total income of the NRI

Total income = GTI − permitted Chapter VIII deductions

GTI means total income computed before Chapter VIII deductions (section 122(10)).

Cap when adjusted total income is positive

Maximum deduction = 5% × adjusted total income

Section 60(2)(b), the case 'any other case'. Allowed deduction is the lower of actual attributable expenditure and this cap.

Cap when adjusted total income is a loss

Maximum deduction = 5% × average adjusted total income

Section 60(2)(a). The average is taken over the three immediately preceding tax years.

Average adjusted total income

Sum of adjusted total income of the years ÷ number of years assessable (3, 2 or 1)

Use three years if assessable in all three, two if assessable in only two, and one if assessable in only one.

Allowable deduction

Lower of (head office expenditure attributable to India) and (cap)

The expenditure must be attributable to the business or profession in India.

Adjusted total income

Total income computed without the section 60 and section 33(11) allowances, section 32(i)(A) deduction, carried forward losses (sections 111(1), 112(1), 113(2), 115(2)) and Chapter VIII deductions

Add these back to the normal total income before taking 5%.

Total income

Total income = Gross Total Income − deductions allowed under the chosen regime

Round off as the law requires. Under the new regime, check section 202(2) before claiming any deduction.

Slab tax under section 202(1)

Up to ₹4,00,000: Nil | 4,00,001–8,00,000: 5% | 8,00,001–12,00,000: 10% | 12,00,001–16,00,000: 15% | 16,00,001–20,00,000: 20% | 20,00,001–24,00,000: 25% | above ₹24,00,000: 30%

Cumulative tax at the top of each slab: ₹20,000 at ₹8 lakh, ₹60,000 at ₹12 lakh, ₹1,20,000 at ₹16 lakh, ₹2,00,000 at ₹20 lakh, ₹3,00,000 at ₹24 lakh.

Rebate, total income up to ₹12,00,000 (section 156(2)(a))

Rebate = lower of (tax payable, ₹60,000)

Only for a resident individual whose income is taxed under section 202(1). Tax at ₹12 lakh is exactly ₹60,000, so tax becomes nil.

Rebate, total income above ₹12,00,000 (section 156(2)(b))

Rebate = Tax − (Total income − ₹12,00,000), if Tax exceeds that excess

This works as marginal relief. Your tax after rebate equals the income above ₹12 lakh. Section 156(3) limits the rebate to tax at section 202(1) rates.

Old regime rebate, section 156(1)

Rebate = lower of (tax payable, ₹12,500), if total income ≤ ₹5,00,000

For a resident individual. Use it only when the question says the assessee has opted out of section 202(1).

Surcharge and cess

Tax payable = (Tax after rebate + surcharge) + 4% cess on (tax + surcharge)

Surcharge applies at the Finance Act rates only when income crosses the stated thresholds, and marginal relief applies at each threshold. Use the rates given in the question.

Limits of section 202(2)(b)

House property loss: no set off against other heads under the new regime

Loss or depreciation from an earlier year that is attributable to the switched-off deductions cannot be set off (section 202(2)(b)(i)).

Self-assessment tax payable

Tax on total income − advance tax − TDS/TCS − relief under section 157 − foreign tax relief (section 159/160) − tax credit under section 206 (as listed) + interest + fee

Section 266(1) and (2) list the amounts to be taken into account. Pay this before furnishing the return and attach proof.

Order of adjustment of a short payment

First fee, then interest, then tax

Section 266(3): if the amount paid falls short of tax, interest and fee together, it is adjusted in this order. Tax may therefore remain unpaid.

Base for interest under section 423

Tax on total income as declared in return − advance tax paid − TDS/TCS − relief under section 157 − foreign tax relief − section 206 credit claimed

Section 266(4). Note that advance tax paid is reduced here.

Assessed tax (base for interest under section 424)

Tax on total income as declared − TDS/TCS on income included in total income − relief under section 157 − foreign tax relief − section 206 credit claimed

Section 266(6). Advance tax is not deducted here. Interest under section 424 is computed on the assessed tax, or on the amount by which advance tax paid falls short of it (section 266(5)).

Consequence of non-payment

Unpaid tax, interest or fee → assessee in default

Section 266(8). This is without prejudice to other consequences (section 266(9)).

Quick revision

• Fix residential status first. Every other step depends on it.
• Section 213(1): no deduction for any expenditure or allowance against the investment income of a non-resident Indian.
• Section 213(2)(a): if gross total income is only investment income or long-term capital gains or both, no Chapter VIII deduction.
• Section 213(2)(b): if other income is also present, reduce gross total income by that income, then allow Chapter VIII as if the reduced figure were the gross total income.
• Section 60 allows head office expenditure attributable to the Indian business or profession, subject to a cap.
• Section 60 cap: 5% of adjusted total income, or 5% of average adjusted total income if the adjusted total income is a loss.
• Average adjusted total income uses the arithmetic mean of the previous three tax years, or two or one if the assessee was assessable in only that many.
• Head office expenditure means executive and general administration expenditure incurred outside India.
• Section 403(3): advance tax is not payable by a resident individual aged 60 or more who has no business or profession income.
• In computations, follow the order: heads of income, gross total income, deductions, total income, tax.
• Under section 312, an executor is treated as resident or non-resident by the residential status of the deceased in the year of death.

Common mistakes

• Treating citizenship as the test for residence Fix: Use days of stay only. Citizenship matters only for the special 182-day and 120-day rules and for deemed residency.
• Applying the 60-day test to a citizen who left for employment abroad or is visiting India Fix: Check first whether the person is a citizen or person of Indian origin in an employment or visit case. If so, use 182 days. Use 120 days only for a visit where income other than foreign-source income exceeds ₹15,00,000; the 120-day rule does not apply to employment or crew cases.
• Treating all foreign income of an NOR as exempt. Fix: An NOR is taxed on foreign income from a business controlled in India or a profession set up in India, even if received abroad.
• Ignoring the place of receipt and looking only at where income is earned. Fix: Receipt in India alone makes income taxable for every status. Check receipt and accrual separately.
• Deducting interest on borrowing from investment income of an NRI. Fix: Section 213(1) bars any expenditure or allowance against investment income. Take the gross amount.
• Allowing Chapter VIII deduction against LTCG or investment income. Fix: Subtract investment income and LTCG from GTI first. Deductions are limited to the reduced figure.
• Taking 5% of total income after the head office deduction and other deductions. Fix: Always compute adjusted total income first, without the section 60 allowance and the other listed items such as Chapter VIII deductions and carried forward losses.
• Claiming the whole head office expenditure of the company. Fix: Only expenditure attributable to the Indian business qualifies. Then apply the 5% cap to that amount.
• Setting off a house property loss against salary under the new regime. Fix: Read section 202(2)(b)(ii). Under the new regime, a loss under house property is not set off against any other head. Show it as carried forward.
• Claiming deductions that section 202(2) switches off. Fix: Check the regime first. Claim only what the question or the law allows under section 202, and write a short note for each disallowed item.

Exam tips

• In MCQs, read the first line for citizenship and employment facts. They decide the day threshold and are the usual trap.
• Show the days arithmetic in a descriptive answer: tax year days, 4-year days, 10-year years and 7-year days, each with its test. Marks follow the working.
• Always end with the status and what it means for tax on foreign income. Examiners link status to the scope of total income.
• Remember that RNOR can still be taxed on foreign income from a business controlled in India or a profession set up in India.
• Use 'tax year' and not 'previous year' in your answer, because the Income-tax Act, 2025 uses 'tax year'.
• In a case scenario, build a status-by-income table on rough paper first. The MCQs then take seconds to answer.
• Watch the verbs: 'received in India' and 'accrues in India' are different tests. A single item can fail one and pass the other.
• For royalty, interest and fees for technical services, always check the payer and the place of use. Examiners build options around the exception.