s.6(6) — Not ordinarily resident
A resident individual or HUF is not ordinarily resident on two look-back tests, and from assessment year 2021-22 two further classes of individuals are, so foreign income not received in India largely stays outside the charge.
Income-tax Act, 1961
s.6(6)
Income-tax Act, 2025
s.6(13) and (14)
In force from 1 April 2026, but s.536(2)(c) preserves the 1961 Act for tax years beginning before that date.
In short
Section 6(13) of the Income-tax Act, 2025, which governs tax year 2026-27 onwards, makes a person not ordinarily resident in a tax year if he is (a) an individual, or a Hindu undivided family whose manager, has been a non-resident in India in nine out of the ten tax years preceding that year, or in India for 729 days or less in the seven preceding tax years; (b) a citizen or person of Indian origin whose total income, other than income from foreign sources, exceeds fifteen lakh rupees during the year, as mentioned in section 6(5), and who has been in India for 120 days or more but less than 182 days during the year; or (c) a citizen deemed resident under section 6(7). Section 6(14) defines income from foreign sources, and section 2(72) treats a not ordinarily resident person as a non-resident for sections 161, 174 and 312. For years up to 2025-26 the rule is section 6(6) of the Income-tax Act, 1961: clause (a) for the individual and clause (b) for the family by its manager on the same two tests, and, from assessment year 2021-22 under the Finance Act, 2020, clause (c) for the citizen or person of Indian origin with total income, other than income from foreign sources, above fifteen lakh rupees, as referred to in clause (b) of Explanation 1 to clause (1), who has been in India for 120 days or more but less than 182 days, and clause (d) for the citizen deemed resident under clause (1A). Its Explanation defines income from foreign sources as income accruing or arising outside India, except income derived from a business controlled in or a profession set up in India, and which is not deemed to accrue or arise in India, the closing words added by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 from 1 April 2021; section 2(30) treats a not ordinarily resident person as a non-resident for sections 92, 93 and 168. Only individuals and Hindu undivided families can be not ordinarily resident; a company, firm or association is resident or non-resident. Under both Acts income accruing outside India is then charged only if received in India or derived from a business controlled in or a profession set up in India (section 5(1)(c) of the 2025 Act; the proviso to section 5(1) of the 1961 Act). The two look-back limbs are alternatives, and because section 3(1) of the 2025 Act defines a tax year as the financial year, they count years before 2026-27.
What the provision does
Keeps a resident individual or family, newly arrived or not yet settled, outside the charge on income accruing abroad and not received in India unless that income comes from a business controlled in or a profession set up in India. It does not make anyone non-resident: a not ordinarily resident person is resident and is taxed on income received or accruing in India. It does not apply to companies, firms, associations or trusts.
Threshold questions
- Is the person resident for the year, so that the question arises at all
- Was the individual, or the family's manager, a non-resident in nine of the ten preceding years
- Was the individual, or the manager, in India for 729 days or less in the seven preceding years
- Is the individual a citizen or person of Indian origin who came on a visit, with income other than income from foreign sources above Rs 15 lakh and 120 or more but less than 182 days in India
- Is the individual a citizen deemed resident under section 6(7) of the 2025 Act or section 6(1A) of the 1961 Act
- Is any foreign income derived from a business controlled in or a profession set up in India
In practice
The recurring disputes.
Whether section 6(13)(b), or clause (c) of section 6(6), protects only the visitor
Section 6(13)(b) of the 2025 Act applies to the citizen or person of Indian origin with income above the line as mentioned in sub-section (5), which speaks of the person who, being outside India, comes on a visit, and clause (c) of section 6(6) of the 1961 Act says as referred to in clause (b) of Explanation 1 to clause (1). The Revenue says the clause is confined to that visitor, so that an individual refused the visitor relief and resident on the 60-day limb is outside it. The assessee says the cross-reference identifies the income condition, not the visit, and that the clause is satisfied by the income and the days. Our view is that the Revenue's reading is the more natural one under the 2025 Act, where the chain of references runs back to sub-section (4), and arguable under the 1961 Act; an individual who loses the visitor relief should plead clause (a) in the alternative.
Whose status decides a family's when the manager changes or is a deemed resident
Section 6(13)(a) of the 2025 Act and section 6(6)(b) of the 1961 Act look to the manager's own history of residence and days. Where the manager changed during the year, the Revenue will look to the manager at the end of the year, the assessee to the person who managed the family for the greater part of it, and the text does not say. Years in which the manager was resident only by the deemed residence rule are years in which he was not a non-resident, and the assessee will argue that they should not count against the family because his days in India were few. That affects only the first limb: the second counts days in India, not status, so a manager deemed resident who spent few days here can still bring the family within 729 days in seven years. The Madras High Court held in S. Marimuthu Pillai (23 February 1945), under section 4B of the 1922 Act, that the periods of residence and stay of successive managers during the family's continued existence count, which the Revenue will apply to take the whole look-back history of every manager; the assessee will answer that section 4B deemed a family ordinarily resident if its manager was, while the present clauses ask whether the manager has been a non-resident, a question about one person's history, and that the case did not decide a change of manager within the year. Swaminathan (1947) and Annamalai Chettiar (1957) add that the manager's status governs and that it is a separate question from the family's residence. Our view is that a Tribunal is likely to apply Marimuthu Pillai, that years of deemed residence count against the family on the first limb because the manager was not a non-resident in them, and that where the manager changed within the year both managers' histories should be tested and the family treated as ordinarily resident if the combined record fails both limbs; the point is open.
Whether the 2025 Act's look-back counts years before 2026-27
Section 6(13)(a) of the 2025 Act counts nine of the ten, and seven, tax years preceding the year. The Revenue's reading, and ours, is that section 3(1), defining a tax year as the twelve months of the financial year commencing on 1 April, makes the earlier financial years tax years for the count. An argument that only years under the 2025 Act are tax years would make every individual not ordinarily resident in the first years of the Act, a result the text does not support.