In the Indian Income Tax system, your residential status plays a decisive role in determining how your income will be taxed. Contrary to popular belief, being an Indian citizen doesn’t automatically make you a tax resident. Instead, the rules under Section 6(1) of the Income Tax Act, 1961 govern this.
This section is significant because an individual is said to be resident in India in any previous year only if certain conditions are met. For NRIs, expatriates, and global entrepreneurs, understanding these conditions ensures they don’t face unnecessary tax liability in India.
In this blog, we’ll break down Section 6(1) in detail, explain its conditions, highlight special provisions for citizens of India & persons of Indian origin (PIOs), and cover how this impacts taxation.
What is Section 6(1) of the Income Tax Act?
Section 6(1) defines the residential status of individuals. It essentially decides whether a person will be treated as a Resident or Non-Resident for tax purposes in India.
Under this section, an individual is said to be resident in India in any previous year if they satisfy either of the two basic conditions:
- The individual is in India for 182 days or more during the relevant previous year,
OR - The individual is in India for 60 days or more during the relevant previous year AND 365 days or more during the four years immediately preceding that year.
Thus, even if a person is not a citizen of India, staying in India for these durations can classify them as a tax resident."
Exceptions for Citizens and Persons of Indian Origin
The law recognizes that many Indians live abroad for work or business. To avoid penalizing them with residential status, special relaxations apply:
- If an Indian citizen leaves India for employment abroad (or as a crew member of an Indian ship), the 60-day condition is replaced with 182 days.
- For a citizen of India or a person of Indian origin (PIO) who visits India during a year, the 60-day rule is relaxed to 182 days.
This means NRIs can visit India for extended periods without automatically becoming residents.
Also Read: Do You Qualify as a Resident? Discover How a Simple Clause Can Decide Your Tax Fate
Amended Provisions for High-Income Individuals
The Finance Act introduced stricter norms for individuals earning significant income from India. If an Indian citizen or PIO’s total income (other than foreign income) exceeds ₹15 lakh in a financial year, the threshold for residency is reduced:
- They will be considered residents if they stay in India for 120 days or more, instead of 182 days.
This ensures that high-income earners cannot misuse the liberal residency rules to avoid taxes.
Resident and Ordinarily Resident (ROR) vs. Resident but Not Ordinarily Resident (RNOR)
Once classified as a resident under Section 6(1), the next step is determining whether the individual is:
- Resident & Ordinarily Resident (ROR) – taxed on global income.
- Resident but Not Ordinarily Resident (RNOR) – taxed only on income accrued in India.
Conditions to be ROR:
- Resident in at least 2 out of 10 previous years, and
- Stayed in India for at least 730 days during 7 preceding years.
If these are not satisfied, the person becomes RNOR, which gives relief to NRIs returning to India temporarily.
Impact of Section 6(1) on Taxation
The significance of Section 6(1) of the Income Tax Act lies in how it defines the taxability of income:
- Residents (ROR): Taxable on global income (India abroad).
- RNOR: Taxable on income earned in India, plus business controlled from India.
- Non-Residents (NR): Taxable only on income earned or received in India.
For example, if an NRI earns rental income from a property in Mumbai, it is taxable in India regardless of their country of residence.
Practical Examples
Example 1: Indian Citizen Working Abroad
Ravi, an Indian engineer, works in Dubai and visits India for 100 days each year. Since his total income in India is below ₹15 lakh, he is considered a Non-Resident.
Example 2: High-Income NRI Visiting India
Meera, an NRI with ₹20 lakh Indian income, stays in India for 125 days. Due to the 120-day rule for high-income earners, she will be classified as a Resident but Not Ordinarily Resident (RNOR).
Example 3: Foreigner Living in India
John, a US citizen, stayed in India for 200 days. He will be treated as a Resident & taxed accordingly, irrespective of nationality.
Also Read: Tax Relief on Foreign Retirement Income for Indian Residents
Importance of Accurate Residential Status
Your residential status under Section 6(1) directly affects:
- Whether global income is taxed in India.
- Eligibility for DTAA (Double Tax Avoidance Agreement).
- Requirement to disclose foreign assets in the ITR.
- Applicability of special provisions like FEMA (Foreign Exchange Management Act).
Incorrect reporting can lead to penalties, scrutiny notices, and double taxation.
Common Misunderstandings
- My passport decides my tax residency.
False – it is based only on the number of days stayed in India. - NRIs don’t need to file returns.
Wrong – NRIs must file returns if their income in India exceeds the exemption limit. - Resident status and citizenship are the same.
Incorrect – one can be a non-resident Indian citizen or a resident foreign national.
How Section 6(1) Links with Section 6(1)(a), 6(1)(b), and 6(1)(c)
- Section 6(1)(a): Applies the 182-day condition.
- Section 6(1)(b): Covers the 60 365 days condition.
- Section 6(1)(c): Deals with Indian citizens and PIOs with income exceeding ₹15 lakh, applying the 120-day rule.
Together, these clauses ensure comprehensive coverage for all categories of individuals.
Why Section 6(1) Matters for NRIs and Expats
For NRIs, Section 6(1) is crucial because it decides whether their foreign salary, overseas investments, and property income abroad will be taxed in India. With India strengthening compliance under FATCA & CRS, global income disclosures are strictly monitored."
Also Read: Taxation Rules for Non-Residents on Dividends, Interest, Royalties & Fees
Conclusion
Section 6(1) of the Income Tax Act is not just a legal clause; it’s the foundation of how tax liability is decided for individuals. An individual is said to be resident in India in any previous year only when specific day-count and income-based conditions are met.
For NRIs, expatriates, and persons of Indian origin, understanding these provisions is critical to avoid unexpected tax burdens. Whether you’re planning to return to India, invest in property, or balance overseas income with Indian tax laws, Section 6(1) will always determine your tax journey.
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