Residential Status and Scope of Total Income

The extent to which a person's income is taxable in India depends heavily on their residential status for that previous year, determined afresh each year under Section 6 of the Income Tax Act.

Broad categories of residential status for an individual:

• Resident — a person who satisfies at least one of the basic conditions of physical presence in India during the previous year (broadly, being in India for 182 days or more in the previous year, or for 60 days or more in the previous year and 365 days or more in the preceding four years, subject to certain exceptions).
• Resident but Not Ordinarily Resident (RNOR) — a resident who additionally satisfies certain further conditions relating to being a non-resident in India for a specified number of years out of the preceding years, or having a limited stay in India over the preceding years.
• Non-Resident (NR) — a person who does not satisfy any of the basic conditions of physical presence in India for that previous year.

Scope of total income (broadly):

• A Resident (Ordinarily Resident) is taxed on their global income — income earned in India, and income earned or received outside India as well.
• A Resident but Not Ordinarily Resident is taxed on income earned/received in India, and on foreign income only if it is derived from a business controlled from, or a profession set up in, India. …