Residence in India [Test for Individual – Not Ordinarily Resident]

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An individual is taxed as ‘not ordinarily resident’ if he fulfills any of the two alternative conditions laid down in clause (6)(a) of section 6 i.e.

(i) he has been non-resident in India in nine out of the ten previous years preceding the relevant previous year; or

(ii) he has during the seven previous years preceding that year been in India for a period aggregating to 729 days or less. Also, as inserted w.e.f. assessment year 01.02.2021, a citizen of India who is deemed to be resident in India under clause (1A) or as per Explanation 1 to clause (1), an Indian citizen or a person of Indian origin visiting India and having total income, other than income from foreign sources (except income derived from a business controlled in or a profession set up in India), exceeding INR 15 lakhs during the previous year shall qualify as NOR in India, if his/ her stay is 120 days or more but less than 182 days in India during the previous year.

In other words an Individual remains ‘Resident’ if both the conditions mentioned in section 6(6)(a) remain unsatisfied. Thus an Individual is classified as ‘Resident’ when in addition to any one of the conditions specified in section 6(1), both the following conditions are fulfilled:

(i) he has been resident in India in at least two out of the ten years preceding the relevant previous year; and

(ii) he has during the seven years preceding that year been in India aggregating to at least 730 days.

Important Judicial Precedents & Board Circulars:

1. Due to declaration of the lockdown and suspension of international flights owing to outbreak of Novel Corona Virus (COVID-19), people were required to prolong their stay in India. Concerns were expressed that this extra stay in India may make them a resident of India under section 6 of the Act.

In order to avoid genuine hardship in such cases, the Board, in exercise of powers conferred under section 119 of the Act, has decided that for the purpose of determining the residential status under section 6 of the Act during the previous year 2019-20 in respect of an individual who has come to India on a visit before March 22, 2020 and:

(a) has been unable to leave India on or before March 31, 2020, his period of stay in India from March 22, 2020 to March 31, 2020 shall not be taken into account; or

(b) has been quarantined in India on account of Novel Corona Virus (Covid-19) on or after 1 March, 2020 and has departed on an evacuation flight on or before 31 March, 2020 or has been unable to leave India on or before 31 March, 2020, his period of stay from the beginning of his quarantine to his date of departure or 31 March, 2020, as the case may be, shall not be taken into account; or

(c) has departed on an evacuation flight on or before 31 March, 2020, his period of stay in India from 22 March, 2020 to his date of departure shall not be taken into account. [Circular No. 11 dated 8 May 2020 on COVID-19 times]

2. Under the second part of sec 6(6)(a) the relevant condition is that the Individual’s aggregate physical presence in India should not have exceeded 729 days; it cannot be construed to mean that absence from India for an aggregate period of over 729 days during the preceding 7 years qualified the assessee to be taxed as ‘resident but not ordinarily resident’ [Munibhai v CIT [1953] 23 ITR 27 (Bombay HC)]

3. The expression four years preceding should be taken as referring to the period of four years of 12 calendar months each, immediately preceding the commencement of the relevant accounting year and not to the period of four calendar years ending on 31Dec immediately preceding the commencement of such year. [CIT v Savumiamurthy [1946] 14 ITR 185 (Madras HC)]

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