According to Section 2(p) of FERA "people residing in India" means :

The term has not been defined in FERA. However, the Exchange Control Manual describes persons of Indian Nationality or origin who are resident outside India as non-resident Indians. Non-resident Indians generally fall under the following categories :

For the purpose of opening and maintaining of various types of bank accounts and investment in shares and securities in India, a foreign citizen (not being a citizen of Pakistan or Bangladesh) is deemed to be a person of Indian origin if :

• He at any time held an Indian passport.
• He or either of his parents or any of his grand parents was a citizen of India by virtue of the Constitution of India or Citizenship Act,1955 (57 of 1955).
• A spouse (who is not a citizen of Pakistan or Bangladesh) of an Indian citizen or a person of Indian origin is also treated as a person of Indian origin for the above purposes, provided the bank accounts are opened or investments in shares/securities in India are made by such persons jointly with their NRI spouses. However for the purposes of Investment in immovable properties the connotation of this term is narrower.

A foreign citizen (other than a citizen of Pakistan, Bangladesh, Afghanistan, Bhutan, Sri-Lanka or Nepal) is deemed to be of Indian origin if :

• He held an Indian Passport at any time, or
• He or his father or paternal grand father was a citizen of India.

It means any overseas company, partnership firm, society or other corporate body which is directly or indirectly controlled by NRIs to the extent of 60% or more as also overseas trusts in which at least 60% of the beneficial interest is irrevocably held by NRIs. The OCBs have to furnish certificates in forms OAC or OAC1 as the case may be.

Section 6 of the Income-tax Act, determines the residential status of the assessee. The residential status of an individual would be determined as under :

(a)An individual is treated as an Indian resident in a financial year(April to March) if he fulfills any of the following two conditions :

• If he is in India that year for a period or periods amounting to 182 days or more.
• If within the four years preceding that year, the person has been in India for a period or periods amounting to 365 days or more and has been in India for 60 days or more in that year.

(b)Under explanation to section 6(1) of the Income-tax Act, the residential status of an individual who is rendering service outside India and who visits India during leave or vacation in any previous year or an individual who is outside India and who comes on a visit to India in any of the previous year will be determined as under :

• An Indian citizen who leaves India for the purpose of employment outside India or as crew member of an Indian ship (as defined in Section 3(18) of the Merchant Shipping Act, 1958) is treated as a resident of India if the period of his stay in India that year amounts to 182 days (instead of 60 days as stated above). Conversely, if his stay in India is less than 182 days, he is treated as a non-resident for that year and his foreign income does not attract tax liability.
• An individual (whether Indian citizen or not) who stays outside India and who comes on a visit to India the previous year will be treated as a resident of India if his stay in India in that year amounts to 182 days or more (instead of 60 days as stated in 1(b) above). Conversely he will be treated as a Non-resident if the period of his stay in India in that year is less than 182 days.
• An individual (whether Indian citizen or not) who stays outside India and who comes on a visit to India in any previous year will be treated as resident in India if his stay in India in that year amounts to 182 days or more (instead of 60 days as stated in 1(b) above). Conversely he will be treated as Non-resident if the period of his stay in India in that year is less than 182 days.

Under the Income Tax Act, 1961, apart from the resident and the non-resident the assessee can have one more status i.e. Not Ordinarily Resident. Only Individuals and HUFs are covered in this category. An individual will be treated as 'not ordinarily resident if he does not fulfill either of the following two conditions:

• He should be residing in India for a period of nine out of ten previous years preceding the previous year in which he was a resident.
• He should be in India for a period(s) of 730 days or more during the seven years preceding the previous year.

It means that if a person who is residing in India for less than nine years out of the ten preceding years will come into the category of "Not ordinarily resident". A person who is a new comer in India would be treated as "not ordinarily resident" in the first nine years of his stay in India. If an Indian resident goes and stays as a non-resident for at least two years and then again decides to return back to India, he would retain the status of "not ordinarily resident" for the next nine years.

In the second condition, an assessee should take care to see that his physical presence in India during the seven years preceding the relevant accounting year should not exceed 729 days. An HUF is "not ordinarily resident" if the manager is 'not ordinarily resident'. The tax liability of a person who is "not ordinarily resident" is the same as in the case of a resident except that the income which accrues or arises outside India is not included in the total income unless it is derived from a business controlled in India.