The residential status of a person, i.e. whether they are resident or non-resident, has a significant financial impact on the tax liability of the concerned assessee; therefore, it is critical to understand the meaning of the respective terms.
Definition of Non-resident: Section 2(30) Income Tax
As per Section 2(30) of Income Tax Act, 1961, unless the context otherwise requires, the term “non-resident” means a person who is not a “resident”, and for the purposes of sections 92, 93 and 168, includes a person who is not ordinarily resident within the meaning of clause (6) of section 6.
A person is said to be “not ordinarily resident” in India in any previous year, under Section 6(6) of Income Tax, if such person is—
(a) an individual who has been a non-resident in India in nine out of the ten previous years preceding that year, or has during the seven previous years preceding that year been in India for a period of, or periods amounting in all to, seven hundred and twenty-nine days or less; or
(b) a Hindu undivided family whose manager has been a non-resident in India in nine out of the ten previous years preceding that year, or has during the seven previous years preceding that year been in India for a period of, or periods amounting in all to, seven hundred and twenty-nine days or less.
Definition of Resident: Section 2(42) Income Tax
As per Section 2(30) of Income Tax Act, 1961, unless the context otherwise requires, the term “resident” means a person who is resident in India within the meaning of section 6.