ES असाधारण निवासी एवं कर दायित्व तथा अनिवासी एवं कर दायित्व

 

Not Ordinarily Resident (RNOR) and Non-Resident (NR) – Tax Liability in India

1. Meaning of Residential Status Under the Income Tax Act, 1961

The tax liability of an individual in India is determined by their residential status, which is categorized as:

1. Resident and Ordinarily Resident (ROR) – Taxed on global income.
2. Resident but Not Ordinarily Resident (RNOR) – Taxed on Indian income + some foreign income.
3. Non-Resident (NR) – Taxed only on Indian income.

These categories are defined under Section 6 of the Income Tax Act, 1961.

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2. Not Ordinarily Resident (RNOR) – Meaning and Tax Liability

A. Who is a Not Ordinarily Resident (RNOR)?

An individual is considered RNOR if they satisfy any one of the basic conditions but do not satisfy both additional conditions under Section 6(6) of the Income Tax Act.

B. Basic Conditions (Any One Must Be Fulfilled - Section 6(1))

✔ Stayed in India for 182 days or more in the relevant financial year.
✔ Stayed in India for 60 days or more in the relevant financial year and 365 days or more in the last 4 years.

C. Additional Conditions (Both Must Be Fulfilled for ROR Status - Section 6(6))

✔ Has been a Resident in India for at least 2 out of the last 10 years.
✔ Has stayed in India for 730 days or more in the last 7 years.

🔹 If both additional conditions are NOT met, the person is classified as RNOR.

D. Tax Liability of RNOR

• Income earned in India (salary, rent, business income) – ✅ Taxable
• Income earned outside India – ❌ Not taxable unless it arises from:
  ✔ A business controlled in India
  ✔ A profession set up in India

Example:

✔ Salary from an Indian company – ✅ Taxable
✔ Rent from property in India – ✅ Taxable
✔ Business profits from a company controlled from India – ✅ Taxable
✔ Foreign salary earned outside India – ❌ Not taxable
✔ Rental income from a house in the USA – ❌ Not taxable

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3. Non-Resident (NR) – Meaning and Tax Liability

A. Who is a Non-Resident (NR)?

A person is considered Non-Resident (NR) if they do not satisfy any of the basic conditions under Section 6(1) of the Income Tax Act.

B. Tax Liability of NR

• Income earned in India – ✅ Taxable
• Income earned outside India – ❌ Not taxable in India

Example:

✔ Salary received in India – ✅ Taxable
✔ Rental income from a house in India – ✅ Taxable
✔ Interest from Indian banks – ✅ Taxable
✔ Salary earned abroad and received outside India – ❌ Not taxable
✔ Business profits from a company outside India – ❌ Not taxable

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4. Summary of Tax Liability Based on Residential Status

Type of Income	Resident & Ordinarily Resident (ROR)	Resident but Not Ordinarily Resident (RNOR)	Non-Resident (NR)
Income earned in India	✅ Taxable	✅ Taxable	✅ Taxable
Foreign income from business controlled in India	✅ Taxable	✅ Taxable	❌ Not Taxable
Other Foreign Income (e.g., salary, rental income from abroad, business outside India)	✅ Taxable	❌ Not Taxable	❌ Not Taxable

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5. Conclusion

• RNOR is a transitional status between ROR and NR, where only Indian income and some controlled foreign income are taxable.
• NRs are taxed only on Indian income, making India an attractive tax destination for returning NRIs and expatriates.
• Proper tax planning based on residential status is crucial for NRIs, expatriates, and global investors.