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Prior to the amendment, an individual, being a person of Indian origin and who came on a visit to India during the previous year was considered as a resident in India only if his period of stay during the relevant previous year was 182 days or more (second basic condition was not required to be tested).

However, after the amendment, a dual condition has been set for determining of the residential status for such Indian citizens visiting India. Under section 6(1), an individual, being a person of Indian origin and who comes on a visit to India during the previous year will be considered as a resident in India, if:

  • He stayed in India for a total period of 120 days or more during the previous year AND for 365 days or more during the 4 years immediately preceding the relevant previous year; AND
  • His total income other than income from foreign sources exceeds Rs. 15,00,000.

However, if the total income does not exceed Rs. 15,00,000, the said individual would be a resident in India, only if he stayed in India for a total period of 182 days or more during the previous year.

Practical example

Dhruv, a person of Indian origin and citizen of USA, got married to Deepa, an Indian citizen residing in USA, on 4th February, 2020 and came to India for the first time on 20th February, 2020. He stayed in India for 164 days during FY 2020-21.

Case 1: During FY 2020-21, Dhruv received gifts in India amounting to Rs. 2,82,000 from friends of his wife in India. Determine his residential status and compute the total income chargeable to tax along with the amount of tax payable on such income for the Assessment Year 2021-22.

Case 2: If he had received Rs. 16,00,000 instead of Rs. 2,82,000 as gifts during the previous year 2020-21 and he stayed in India for 400 days during the 4 years preceding the previous year 2020-21, what will be his residential status and tax liability?

Analysis

In the present case, since Dhruv is a person of Indian origin visiting India, the dual condition prescribed by the amendment needs to be tested.

Case 1

Dhruv stayed in India for more than 120 days in the previous year (i.e 164 days) but did not stay for 365 days or more during the 4 years immediately preceding the relevant previous year. Also, his total income did not exceed 15 lacs. It was only Rs. 282,000. Hence, he will be treated as a non-resident during FY 2020-21.

His total tax payable will be Rs. 1,660. {[5% * (282,000-250,000) ] + 4% * 1600}. Note: Rebate u/s 87A in not available to non-residents.

Case 2

Dhruv stayed in India for more than 120 days in the previous year (i.e. 164 days) and for more than 365 days during the 4 years immediately preceding the previous year (i.e 400 days). Also, his total income during FY 2020-21 exceeded Rs. 15 lacs (i.e Rs. 16 lacs in the instant case). Hence, he will be treated as a resident during FY 2020-21 under Case 2.

His total tax payable under the normal provisions will be Rs. 304,200.

Hope this analysis was useful in understanding the amendment!

The author, CA Aditi Bhardwaj is a practicing Chartered Accountant and a teacher for CA Intermediate and CA Final at Superrad Academy, Bangalore.

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Author Bio

Aditi Bhardwaj is a qualified chartered accountant since 2008 and a partner at Aditi Bhardwaj & Co. Chartered Accountants. She specializes in complex taxation matters which includes individual taxation, corporate taxation, transfer pricing, international taxation, litigation and advisory. Her View Full Profile

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6 Comments

  1. Sourav K says:

    Maam, I dont understand why you mentioned the situation of 120 days in Case 1 example. There his income is below 15 lakhs, So we just need to see if he is there for 182 or more in India or not. As he is in India for only 164 days he is non resident, isn’t that true?

  2. Ram Ramakrishnan says:

    Your examples are inadequate to explain the whole concept brought in by the Finance Act 2020.

    Person of India origin can not be combined with other country citizenship to arrive at the tax status.

    Tax status of an individual in India is based on 1. Physical stay in terms of the days stay in a fiscal year and 2. Citizenship of the individual.

    I your example you are combining person of origin with US citizenship.

    This is not why the person of origin is brought in for tax status determination.

    You should segregate the examples.

  3. K.S. GAHUNIA says:

    Donation to Care India is eligible at 50% Deduction.
    Rs. 1000/- had been donated. In ITR under 50% (80G) do we report Rs. 500/- only or Rs. 1000/-

  4. Geetha S says:

    My daughter is returning to India in October 2021 permanently after her completion of employment abroad for the past 5 years. She was non resident in all these years. What will be her status for Financial year 2021-22 and 2022-23.Thanks.

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