What is Ordinarily Resident?

How it works

"Ordinarily resident" sits between resident (mechanical day-count) and domiciled (sticky permanent home concept). It captures the idea of someone who has made a country their normal mode of life for the time being — not just visiting, but not necessarily there forever either.

Common-law definition (Lord Scarman in Shah v Barnet LBC, 1983, the leading UK authority): an ordinarily resident is "habitually and normally resident in [the relevant country] from choice, and for a settled purpose, as part of the regular order of his life for the time being".

Three elements stack:

1. Voluntary residence — chosen, not forced.
2. Settled purpose — work, education, family, retirement.
3. Regular order of life — not casual or transient.

A backpacker spending six months in Australia is resident by day count but not ordinarily resident — the stay isn't part of a settled life pattern. A foreign student on a 3-year programme is both resident and ordinarily resident — the stay is settled and regular.

Where it still matters

The concept has been largely retired in modern UK income tax (replaced by the Statutory Residence Test in 2013), but survives in:

• UK Inheritance Tax — domicile-driven, but historically considered "ordinary residence" in some carve-outs and grandfathered rules.
• UK immigration — ordinarily resident status determines eligibility for certain visas, NHS access, university tuition rates (home vs. international).
• Canada — Canadian Income Tax Act uses "factually resident" and "deemed resident" with similar concepts.
• India — RNOR (Resident but Not Ordinarily Resident) classification: a tax resident who has been non-resident in 9 of the 10 prior tax years, taxed only on Indian-source and certain controlled foreign income for the first 2-3 years of return. Critical for NRIs returning to India.
• Ireland — ordinarily resident concept distinct from resident; broadens IHT and CGT scope.
• Australia, South Africa, Singapore — analogous concepts in immigration and tax statutes.

Indian RNOR (the most consequential modern use)

A returning Indian non-resident becomes Resident but Not Ordinarily Resident if they have been:

• Non-resident in 9 of the 10 prior tax years, or
• In India for less than 729 days in the prior 7 tax years.

RNOR status (for typically 2-3 years after returning) means India taxes only Indian-source and certain CFC-style controlled-foreign-business income — global income earned abroad stays untaxed. Powerful planning tool for NRIs returning to India after long stints in the US or UK; sequencing the return to maximise RNOR years can save substantial tax.

Examples

• British executive on 2-year Singapore assignment. Resident in Singapore (passes 183 days). Ordinarily resident in Singapore? Likely yes — settled purpose (job), regular order of life (rented apartment, family relocated). UK ordinary residence claim probably ends if the move is genuine. UK domicile remains separately analysed.
• NRI returns to India after 12 years in Dubai. First two Indian tax years post-return likely qualify for RNOR. India taxes only Indian-source income; Dubai-source income (if any continuing) and other foreign investment income stay untaxed in India during RNOR years. Standard residence kicks in from year three.

Common mistakes

• Treating "ordinary residence" as identical to residence. It's a higher bar — settled purpose and regular life. A first-year arrival can be tax-resident without being ordinarily resident.
• Assuming the UK still uses it for income tax. Largely abolished from 2013. Survives in inheritance and immigration contexts only.
• Missing the Indian RNOR window. Returning NRIs frequently miss the 2-3 year planning opportunity. Once full residence kicks in, India taxes worldwide.
• Confusing ordinary residence with habitual abode. Ordinary residence is a domestic-law concept (UK, Canada, India). Habitual abode is an OECD treaty tie-breaker. Different tests, different remedies.