Residential Status: –
(a) The incidence of tax on any assessee depends upon his residential status under the Act. The residential status of an assessee must be ascertained with reference to each previous year. A person who is resident in one year may become non-resident in another year or vice versa.
(b) The residence of an individual for income-tax purpose has nothing to do with citizenship, place of birth or domicile. An individual can, therefore, be resident in more countries than one even though he can have only one domicile.
What are Different Types of Residential Status in Case of Individuals: –
Following are the categories of the Residential Status of India under Income Tax Act, 1961.
1. Resident of India
2. Non-resident of India
3. Deemed Resident of India
The residential status of an assessee must be ascertained with reference to each previous year. A person who is resident and ordinarily resident in one year may become non-resident or resident but ordinarily resident in another year or vice versa. The provision for determining the residential status of assesses
Resident of India is further divided under (i) Resident & Ordinary Resident and (ii) Resident but Not Ordinary Resident.
Determination of Residential Status of assesses-
Residential Status (General Conditions): –
As per section 6(1) of Income Tax Act, 1961, Residential status is determined on the basis of number of days of stay in India.
An individual is said to be resident in India in any previous year, if he satisfies any one of the following conditions:
i. He has been in India during the previous year for a total period of 182 days or more
OR
ii. He has been in India during the 4 years immediately preceding the previous year for a total period of 365 days or more and has been in India for at least 60 days in the relevant previous year.
If the individual satisfies any one of the conditions mentioned above, he is a resident. If both the above conditions are not satisfied, the individual is a non- resident.
The term “stay in India” includes stay in the territorial waters of India (i. e., 12 nautical miles into the sea from the Indian coastline). Even the stay in a ship or boat moored in the territorial waters of India would be sufficient to make the individual resident in India.
It is not necessary that the period of stay must be continuous or active nor is it essential that the stay should be at the usual place of residence, business, or employment of the individual.
For the purpose of counting the number of days stayed in India, both the date of departure as well as the date of arrival are considered to be in India.
Residential status of HUF: –
A HUF would be resident in India if the control and management of its affairs is situated wholly or partly in India. If the control and management of the affair is situated wholly outside India it would become a non-resident.
Residential status of firms and association of persons: –
A firm and an AOP would be resident in India if the control and management of its affairs is situated wholly or partly in India. Where the control and management of the affairs is situated wholly outside India, the firm would become a non-resident.
Residential status of companies: –
A company is said to be resident in India if-
- It is an Indian company as defined under section 2(26), or
- Its control and management is situated wholly in India during the accounting year.
Residential status of local authorities and artificial juridical persons: –
Local authorities and artificial juridical person would be resident in India if the control and management of the affairs is situated wholly or partly in India. Where the control and management of the affairs is situated wholly outside india, they would become non-residents.
Deemed resident [Section 6(1A)]: –
An individual, being an Indian citizen,
(i) having total income, other than the income from foreign sources exceeding Rs. 15 lakhs during the previous year would be deemed to be resident in India in that previous year, and
(ii) if he is not liable to pay tax in any other country or territory by reason of his domicile or residence or any other criteria of similar nature, and
(iii) Who is not Resident as per Section6(1) of Income Tax Act, 1961. (as Per General Conditions).
The above rule of determining a person as a “deemed resident” of India will only be applicable where the normal rule of residency based on the individual’s physical presence in India during the relevant previous year and/or past four tax years is not applicable.
For the purpose of residency in India, the expression “India sourced taxable income” shall include income deemed to accrue or arise in India.
In order to provide more clarity on the applicability of this provision, definition of the term ‘liable to tax’ is introduced which means that there is a liability of tax on the person under any law for the time being in force in any country and it also includes a case where subsequent to imposition of tax liability, an exemption has been provided.
Resident and ordinarily resident/Resident but not ordinarily resident: –
Only individuals and HUF can be “Resident and ordinarily resident” or “resident but not ordinarily resident” in India. All other classes of assesses can be either a resident or non-resident.
A Resident and ordinarily resident total income of a resident assessee would, under section 5(1), consists of:
- Income received or deemed to be received in India during the previous year;
- Income which accrues or arises outside India even if it is not received or brought into India during the previous; and
- Income which accrues or arises or is deemed to accrue or arise in India during the previous year
A Resident but not-ordinarily resident person is one who satisfies any one of the conditions specified u/s 6(6).
i. If such individual has been non-resident in India in any 9 out of the 10 previous years preceding the relevant previous year, or
ii. If such individual has during the 7 previous years preceding the relevant previous year been in India for a period of 729 days or less, or
iii. If such individual is an Indian citizen or person of Indian origin who, being outside India, comes on a visit to India in any previous year having total income, other than the income from foreign sources exceeding Rs. 15 lakhs during the previous year, who has been in India for 120 days or more but less than 182 days during that previous year, or
iv. If such individual is an Indian citizen who is deemed to be resident in India under section 6(1A).
If no condition is satisfied of the section 6(6) above in relation to the not-ordinarily resident, then person will be become resident and ordinarily resident.
Conclusions: –
1. An individual is said to be resident in India in any previous year, if He has been in India during the previous year for a total period of 182 days or more OR He has been in India during the 4 years immediately preceding the previous year for a total period of 365 days or more and has been in India for at least 60 days in the relevant previous year subject to the exceptions given above.
2. Indian Citizen leave India as Crew Member of Indian Ship or for Employment Purpose, will be treated as resident in India only if the period of their stay during the relevant previous year amounts to 182 days or more.
3. Indian Citizen or Person of Indian Origin being Outside India comes on Visit during Previous Year Whose Total Income Excluding Foreign Income is up to 15 Lacs during Previous Year, will be treated as resident in India only if the period of their stay during the relevant previous year amounts to 182 days or more.
4. In Case of Indian Citizen or Person of Indian Origin being Outside India comes on Visit during Previous Year Whose Total Income Excluding Foreign Income is More 15 Lacs during Previous Year. If his stay period is 182 days or More during Previous year, He may be “Resident and ordinary Resident” or “Resident but not Ordinary Resident” based on Condition. However, His period of Stay is More than 120 days or more but less than 182 days during previous year, he will Always be “Resident but Not Ordinary resident”.
5. Deemed Resident will always be Resident but not Ordinary Resident.
Aishwarya Says:
I have always been against Glorifying Over Work and therefore, in the year 2021, I have decided to launch this campaign “Balancing Life”and talk about this wrong practice, that we have been following since last few years. I will be talking to and interviewing around 1 lakh people in the coming 2021 and publish their interview regarding their opinion on glamourising Over Work.
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