Describe the requirements that must be met for someone to be a resident but not a regular resident.
Explain the conditions which should be satisfied for an individual to be resident but not ordinarily resident.
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Describe the requirements that must be met for someone to be a resident but not a regular resident.
Resident but Not Ordinarily Resident (RNOR):
1. Definition: RNOR is a tax status applicable to individuals in India who qualify as residents but do not meet the criteria to be considered "ordinarily resident." RNOR status has implications for the taxation of income earned both in India and abroad.
2. Conditions for RNOR Status:
2.1 Resident Status: To be considered RNOR, an individual must first meet the criteria for being a "resident" as per the Income Tax Act. There are two primary tests for residency:
2.2 Not Ordinarily Resident: Additionally, to be classified as RNOR, the individual must not be "ordinarily resident" in India. An individual is considered ordinarily resident if they meet either of the following conditions:
3. Implications of RNOR Status:
3.1 Taxation of Income: RNOR individuals enjoy certain tax benefits compared to residents and ordinarily residents. Income earned outside India and income earned in India but received or deemed to be received outside India is taxable in India only if it is derived from a business controlled in or a profession set up in India.
3.2 Reporting Requirements: RNOR individuals have specific reporting requirements for foreign assets and income, including the filing of the Foreign Assets Schedule (Schedule FA) along with their income tax return.
4. Conclusion:
To qualify as RNOR in India, an individual must meet the criteria for being a resident but not be considered ordinarily resident. RNOR status provides certain tax benefits related to income earned outside India. Understanding the conditions for RNOR status is important for individuals to effectively manage their tax liabilities in India.