Amendments to Section 6 (Residential Status) by Finance Act, 2020 are basically divided in three parts:

1.Curtailment of benefit of Explanation 1, in clause (b) to certain Indian Citizen and PIOs (person of Indian origin) (182 Days to 120 Days) with more than 15 Lacs Indian Income,

2. Deemed Residency for Indian Citizen with more than 15 Lacs Indian Income,

3. RBNOR Status.

Detailed analysis of above three amendments:

Sr. No. Old Provision New Provision
1) A person will be resident if he satisfy any one of the following two conditions –

1. If he is in India for 182 days or more during the previous year OR

2. If he is in India for 60 days or more in previous year and 365 days or more during 4 previous years preceding to that year.

Explanation 1 clause (b) –

A person being a citizen of India, or a person of Indian origin who, being outside India comes on a visit to India in any previous year, then in his case 60 days in above provision needs to be read as 182 days.

A person will be resident if he satisfy any one of the following two conditions –

1. If he is in India for 182 days or more during the previous year OR

2. If he is in India for 60 days or more in previous year and 365 days or more during 4 previous years preceding to that year.

Explanation 1 clause (b) –

A person being a citizen of India, or a person of Indian origin who, being outside India comes on a visit to India in any previous year, then in his case 60 days in above provision needs to be read as 120 days.

Further the application of explanation 1 clause (b) is restricted only to that Indian citizen or a person of Indian origin whose total income, other than income from foreign sources, exceeds Rs. 15 lakhs during the previous year.

2) Earlier a person can be a resident of India only if he satisfies any of two conditions discussed above in OLD PROVISION, AMENDMENT 1 above. According to new clause (1A) in section 6, an India citizen shall be deemed to be the resident if he is not liable to tax in any other country or territory by reason of his domicile or residence or any other criteria of similar nature.

Further the application of New clause (1A) in section 6 is restricted only to that Indian citizen or a person of Indian origin whose total income, other than income from foreign sources, exceeds Rs. 15 lakhs during the previous year.

3) As per Section 6, a resident individual or a Hindu Undivided Family (HUF) is deemed as Not Ordinarily Resident in India, if he satisfies any of the following conditions:

a) Individual or Karta of HUF has been a non-resident in India for at least 9 years out of 10 years preceding the previous year; OR

b) Individual or Karta of HUF has been in India for 729 days or less during the period of 7 years preceding the previous year.

The Finance Act retained the existing two situations and further added two more situations to categorize a person as RBNOR, which are: –

a) An Indian Citizen or a person of Indian origin whose total income (other than income from foreign sources) exceeds Rs. 15 lakhs during the previous year and who has been in India for a period of 120 days or more but less than 182 days; OR

b) An Indian Citizen who is deemed to be resident in India as per new Section 6(1A).

Explanation – For the purpose of this section, the expression “Income from foreign sources” means income which accrues or arises outside India (except income derived from a business controlled in or a profession set up in India).

Indian Income – Having total income, other than the income from foreign sources, exceeding fifteen lakh rupees during the previous year.

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