What is Residential Status?

The term residential status was given by the Income Tax Department of India to determine the taxability of an individual or a company. Under the Income Tax Act, it is defined that the taxability can only be determined with the residential status of that person in a fiscal year. It is very important to know during the tax-filing season because it is an important aspect in determining a person's taxability. 

The meaning of residential status should not be confused with someone's citizenship in India; they are very different terms. A person can be a citizen of India, but he doesn't need to be also a resident of India for a certain year. Similarly, a foreign citizen can be a resident of India for income tax purposes for a particular year. The residential status meaning can be different for all sorts of people, like an individual, a company, or a corporation, so the taxability is decided differently. 

Different Types of Residential Status

There are three types of residential status in India according to the income tax law, and they are categorised based on the time an individual has spent in India. The residential status will include the stay of the current fiscal year and also the previous year's stay. The categories in which the residential status of an individual is divided are as follows: 

1. Resident and Ordinarily Resident (ROR)

2. Resident but Not Ordinarily Resident (RNOR)

3. Non-Resident (NR)

The Income tax law has specific staying conditions for all three categories, which help them to decide whether the individual falls in the category of ROR, RNOR, or NR. It also helps in determining the taxability of income in India. Everyone needs to have a basic understanding of the income tax laws.