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Q.4 — How is residence of assessees determined for income tax purpose? Explain the incidence of residence on tax liability. Meaning of Residence for Income Tax Purpose Under the Income Tax Act, 1961 , the residential status of a person is very important because tax liability depends on it . It decides what kind of income will be taxed in India — whether Indian income only or also foreign income. The term “assessee” means a person who is liable to pay tax under the Income Tax Act. So, before calculating tax, the Income Tax Officer first determines whether the person is: Resident and ordinarily resident (ROR) , Resident but not ordinarily resident (RNOR) , or Non-resident (NR) . 1. Determination of Residential Status (Section 6 of Income Tax Act, 1961) For Individual: An individual is said to be Resident in India if he satisfies any one of the following two basic conditions: Stay in India for 182 days or more during the previous year; OR Stay in Ind...