Summary: Section 6 of the Income Tax Act, 1961 defines the residential status of an assessee, which determines tax liability in India. An individual is classified as either a Resident or Non-Resident in a financial year. Residents are further divided into Ordinarily Resident and Not Ordinarily Resident categories. An individual qualifies as a Resident if: (a) they stay in India for 182 days or more in the previous year, or (b) they stay for 60 days or more in that year and 365 days or more during the preceding four years. However, exceptions apply for Indian citizens leaving India for employment or as crew members, and for Indian citizens or persons of Indian origin visiting India—where the 60-day limit is replaced by 182 days.
The Finance Act, 2020, effective from April 1, 2021, introduced that an Indian citizen with income exceeding ₹15 lakh (excluding foreign sources) will be treated as a resident if their stay in India exceeds 120 days. Further, Section 6(1A) deems such a person as “Resident” if they are not liable to tax in any other country. For example, Mr. X, an Indian citizen who left for the USA on 24 June 2024, satisfies both the stay conditions and additional tests under Section 6(6) (residing in India for at least 2 of the last 10 years and 730 days in the last 7 years), making him a Resident and Ordinarily Resident for FY 2024–25. A Hindu Undivided Family (HUF), firm, or association of persons is resident in India unless its management and control are entirely outside India. A company is resident if it is incorporated in India or if its place of effective management during the year is in India.
Section 6 of the Income Tax Act, 1961 clarify about the residential status of an individual.
1. An individual is said to be resident in India in any previous year, on the basis of residential status. For this purpose, assesses are divided in to two categories:
(i) Resident in India, and
(ii) Non Resident in India.
Individual and Hindu undivided families who are resident in India are again classified as:
(a) Ordinarily resident, and
(b) Not ordinarily resident.
Ordinarily Resident in India:
(A) In respect of “Individuals”
Section 6 of the Income Tax Act, 1961, deals with residence in India. The residential status of an individual would be determined as under:
(1) An individual will be considered as resident in India in any previous year if he fulfills any of the following two conditions laid down in section 6(1).-
(a) he is in India in that year for a period or periods amounting in all to 182 days or more; or
(b) having within the four years preceding that year been in India for a period or periods amounting in all to 365 days or more and has been in India for 60 days or more in that year.
(2) Under explanation 1 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 and an individual who is outside India and who comes on a visit to India in any previous year will be determined as under:
(a) an Indian citizen who leaves India in any previous year for the purpose of employment outside India or as a crew member of an Indian ship would be treated as resident in India if the period of his stay in India in that year amounts to 182 days or more [instead of 60 days as stated in 1(b) above] Conversely, if the period of his stay in India is less than 182 days, he will be treated as “Non Resident’ for that year and his foreign income would not attract tax liability.
The amended Explanation 1(b) to section 6(1), w. e. f. 1st April, 2021, provides that in the case of such person having total income, other than the income from foreign sources exceeding Rs. 15 lakhs during the previous year will be regarded as “Resident” in India, if his stay in India is for more than120 days, instead of more than 60 days as stated in 1(b) above.
(b) An Indian Citizen or a person of Indian origin who resides 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 previous year amount to 182 days or more [instead of 60 days as stated in 1(b)]. Conversely, he will be treated as “Non Resident” if the period of his stay in India in that year is less than182 days.
(c) Section 6(1A), w. e. f. 1st April, 2021 i.e. assessment year 2021-22 and on words, provides that notwithstanding anything contained in section 6(1), an individual being a citizen of India, having total income, other than the income b
From foreign sources exceeding Rs. 15 lakhs during the previous year will be deemed to be resident in India in that previous year, if he is not liable to tax in any other country by reason of his domicile or residence or any other criteria of similar nature.
Example:
Mr. X is an Indian citizen, left India for the first time for USA on 24th June, 2024. What will be his residential status for financial year 2024-25?
As per Section 6(1), a person is Resident in India if;
- Stay in India is 182 days or more during the financial year OR
Stay in India is 60 days or more in that financial year and 365 days or more in preceding 4 years.
Mr. X has fulfill both the condition and hence he is Resident.
Over and above Mr. X has also fulfill additional condition under section 6(6), for being treated as Ordinarily Resident i.e.
Resident in at least 2 out of last 10 financial year and
Stayed in India for 730 days or more in last 7 years,
Residential Status of Mr. X is Resident and Ordinarily Resident.
IN RESPECT OF HUF, FIRM OR OTHER ASSOCIATION OF PERSONS.
A HINDU UNDIVIDED FAMILY, FIRM OR OTHER ASSOCIATION OF PERSONS is said to be resident in India in a previous year except where during that year the control and management of its affairs is situated wholly outside India [Section 6(2)].
IN RESPECT OF A “COMPANY”
A Company is considered as Resident in India in any previous year if it satisfies any of the following conditions:
(i) it is an Indian Company, or
(ii) its place of effective management, in that year, is in India. [Section 6(3)]
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